Investing in The Future Report Fs

FINANCIAL SERVICES
Investing
in the future
How megatrends are reshaping the future
of the investment management industry
kpmg.com/investmentmanagement
KPMG INTERNATIONAL
investing in the future
Nobody can predict

the future. However,
one thing is clear, it
will be very different
to today. We believe
that a number of
deeply-rooted forces megatrends - are driving
fundamental changes
within the investment
management industry.
2014 KPMG International Cooperative (KPMG International). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Contents
04
10
12
Introduction and headlines

What could an investor look like in 2030?
Megatrends - the drivers of change
Demographics
16
20
31
Technology
24
Environment
28
Social values, behavior & ethics
Implications for investment management

36
Value
chain
Clients
42
48
Products
and brands
56
Markets
60
Technology
64
Governance
68
People
72
76
Is there potential for more radical disruption?

Conclusion: key questions for top management teams
Introduction
At KPMG, we believe that the future for the investment management industry
is very positive and yet to capture the opportunities presented, it will have to
overcome unprecedented challenges.
Have you ever considered what the investment

management industry will look like in 2030? Nobody
can predict the futurebut one thing is clear, it will
be very different to today. The pace and complexity
of change is overwhelming and it will only increase.
impact on almost every aspect of our lives, creating new

opportunities and disrupting existing business models.
The increasing speed of technological change, growing
ubiquity of technology and explosive growth of data are
perhaps the most pervasive examples.
The world in which we live and work is changing

rapidly, driven by a number of deeply-rooted forces
megatrends. We have been tracking these trends and
considering the potential implications for the industry.
Resource insecurities are changing the nature,

structure and timeline of investment opportunities and
generational shifts are driving demand for immediacy,
transparency and personalization. Social networks and
communities are developing and expanding and peers
will become as important as providers for many.
The industry has grown considerably over the past 30

years. This has been driven primarily by the industrys
focus on the Baby Boomers through three decades
of strong market growth. It has also been underpinned
by rapid globalization and an exponential increase in
international capital flows.
However, the Baby Boom generation is now approaching
retirement and drawing down on its savings. At the
same time, deleveraging in the worlds major economies
is putting a cap on growth rates, which only exacerbates
the tensions stemming from generational and economic
differences. When these lower growth rates are
considered in the context of waning trust between
financial services firms and investors in the aftermath
of the financial crisis, it is clear that the industry faces
significant challenges.
Against this backdrop we believe that the industry
needs to consider how megatrends are driving change.
However, in our experience, not enough attention
is being paid to them. We believe that demographic
changes, technological advancement, changes in the
environment and evolving social values and behaviors
will reshape the industry of the future.
An aging population, combined with low birth rates,
low savings rates and high levels of fiscal debt are
creating a growing retirement burden which is shifting
increasingly to the individual. The growing middle class
in many developing countries is increasing demand for
savings solutions. The digital revolution continues to
We believe that the confluence of these trends will

change the needs, requirements and behaviors of
investors of the future; the clients of tomorrow are
likely to be very different from the clients of today.
This presents significant opportunities for the industry,
but also unprecedented challenges and raises a number
of key questions for executives.
This paper does not attempt to predict the future,
present forecasts based on historical data or attempt
to second guess government policy or regulation. Our
intention is simply to stimulate debate and encourage
the industry to think more laterally about how clients
needs will evolve and the implications for investment
managers their proposition and how they structure,
organize and manage their businesses. As you read the
paper, we ask you to consider which trends will impact
you most? Do you need to take action now? Which do
you need to monitor and track going forward? How
might the rules of the game change and what
would you do?
We are excited by the industry prospects and we
hope that you find this paper thought-provoking. We
encourage you to consider and reflect on the themes
covered and contact us or reach out to your local KPMG
member firm to discuss how these megatrends will play
out in your jurisdiction.
KPMG in the UK
Tom Brown
Ian Smith
Lucy Luscombe
Global Head
of Investment
Management
Partner,
The Strategy Group
in the UK
Associate Director,
The Strategy Group
in the UK
Throughout this document, KPMG [we, or and us] refers to KPMG International, a Swiss entity that serves as a coordinating entity for a network of
independent member firms operating under the KPMG name, and / or to anyone of such firms. KPMG International provides no client services.
Headlines
The megatrends referenced in this paper have the potential to significantly impact
the investment management industry of 2030. However, the highly interconnected
and interrelated nature of these trends is likely to magnify the
overall ramifications for the industry.
We believe that over the next 15 years:

1
Demographic transformation, combined with

technological advancement and social shifts,
will significantly change the profile, needs
and requirements of investors. Clients will be
considerably more diverse in terms of who they are,
where they are located and what they need, want
and expect from the industry. In order to effectively
target and service this increasingly diverse client
base, we believe client profiling, data analytics and
operational flexibility will play increasingly important
roles going forward.
There will be opportunities for investment
managers to play a broader role in the industrys
value chain as client demands of investment
providers continue to change. We recognize that
alpha generation and return delivery will remain
key to the overall value proposition, particularly
as investors seek to provide for what could be
an increasingly uncertain financial future given
current savings rates. Interestingly for investment
managers, delivering the level of return sought may
be increasingly challenging in an environment in
which these megatrends are present, as we have
very limited historical precedent on how to achieve
this. However, as investor engagement improves
(more out of necessity than desire), we believe
they are likely to value broader or newer aspects of
the proposition set, outside the core investment
management process.
This could include:

}} the level of advice, support, information and
education a provider offers its investor base.
}} the ease of use and simplicity of the up-front
asset allocation process.
}} the access provided both in terms of breath of
proposition set, asset classes available and ability
to aggregate solutions and financial positions
across a range of financial providers.
}} the depth of understanding of a clients individual
needs, risk-return appetite and the readiness to
tailor a personalized financial solution and service
model accordingly.
}} the degree of certainty and protection offered that
intended outcomes will be delivered.
Asset managers will have to make strategic choices
in terms of where they want to position themselves
to capture opportunities and what value they bring.
Furthermore, in addition to the potential for
significant value chain shifts, we believe a number of
aspects of investment theory are being called into
question which will challenge core elements of the
investment process and approach.
Operational flexibility and agility will become

key competitive advantages. While asset
managers have been working diligently to improve
operational efficiency, cost flexibility and to
incorporate new technologies and new media
into their existing infrastructure, we believe much
of this work has been focused on addressing the
legacy of yesterday and issues of today rather
than preparing for the future. Going forward, some
tough decisions may need to be made. We believe
as asset managers look to take advantage of the
opportunities presented by some of the longer-term
shifts and respond to the subsequent challenges
posed by an increasingly fast-paced world, it is likely
to necessitate:
}} a robust core platform which can be customized
and tailored to address increasingly diverse client
needs, differing expectations of service and
deliver a personalized offering.
}} a more rigorous focus on harnessing and
leveraging a wider pool of data to drive investor
insights, enhance the investment process and
direct internal effort and investment.
connectivity with other organizations in the asset

managers broader network or value chain.
}} a review of HR policies and practices to ensure
they accurately reflect the evolving nature of
the global talent pool, employees changing
expectations of working models and potential
shifts in the core competencies for which asset
managers are searching.
4 }} Finally, there is the potential for the industry
to see more radical disruption. With retirement

systems under considerable strain in many global
economies, existing savings and investments
models will need to change, providing opportunities
for more radical shifts. This could either be as a
result of new entrants (perhaps with established
brands) looking to move into what remains
a relatively high-margin industry or for more
innovative product solutions to challenge the
existing proposition set by increasing outcome
certainty. Would investors be more prepared
to save if they were able to lock down value in
physical goods or services earlier in the product
lifecycle? Could this create a paradigm shift?
}} a more effective organizational structure, capable

of managing the challenges created by further
geographic expansion, withstanding the ongoing
scrutiny of risk management frameworks by
regulators and clients alike and providing better
The future belongs

to people who see
possibilities before
they become obvious.
Ted Levitt
American economist and professor
at Harvard Business School
What could an investor

look like in 2030?
Profile:
Needs:
}} While there may be fewer typical investors,

there are likely to be more investors located in different
places, with different needs, social, political and
economic attitudes, lifestyles and income patterns.
}} Investors are likely to need to increase their level of

engagement with the industry. A greater proportion
of the population will probably need to manage their
finances more actively to take control of their
financial future.
}} Institutional investors are also likely to continue to

change in profile. Sovereign wealth funds are likely to
play an even greater role. Defined benefits providers
will probably continue to decline and be replaced by
new collective defined contribution schemes, new
risk-sharing pensions or healthcare savings vehicles.
The advent of megacities could also act as important
force shaping the institutional client landscape.
}} They are likely to look for financial support to cover a

greater proportion of their lives, rather than focusing
exclusively on saving for retirement.
}} With financial literacy remaining low across the globe,
the industry may be expected to provide better advice,
information, education and support as investors seek
to better manage their personal finances.
}} As investors experience an increasing number of
life events, the flexibility to adapt and change their
investment portfolio will become more critical.
11
Wants and expectations:
Behaviors:
}} Investors are likely to expect organizations to

understand them, treat them as individuals and
customize and tailor service models to suit their
specific requirements.
}} Investors may increasingly trust and value advice

from alternative sources. Decisions are likely to
be influenced not only by their peers, friends and
colleagues, but also the opinions of online groups and
social media communities, which may span countries,
cultures and which will almost certainly be comprised
of strangers.
}} Investors will increasingly look for brands they can

trust. In an industry currently suffering from high
levels of consumer mistrust, investors are likely to
assign increased value to trusted brands, particularly
as awareness of issues such as data security,
confidentiality and privacy increases.
}} In tomorrows world, simplicity, transparency, honesty
and integrity, are likely to be regarded as more
important buying criteria.
}} Investors will probably want less risk and more
certainty so they can be confident that the products
in which they are invested will deliver the intended
outcomes. As a result, they are likely to expect better
solutions to their individual needs and may also want to
lock down value earlier in a product lifecycle.
}} Interactive service models, 24/7 connectivity and
access to relevant and timely information via a wide
variety of media types will increasingly be expected as
the norm.
}} Investors are likely to be more willing to consider

non-traditional alternatives to traditional savings and
retirement products, either as a result of increased
availability and investor awareness, social and peer
pressures or ongoing mistrust in the traditional
financial services industry.
}} As the pace of technological advancement continues
to increase, investors willingness to adopt new
products and technologies is also likely to grow. Their
dependency on such technologies will almost certainly
increase at the same time.
}} Multitasking and time scarcity is likely to continue
to escalate, prompting more investors to look for
time-saving solutions, single point of access and
aggregation across a range of providers.
12
13
Megatrends
The drivers of change
Seismic shifts in demographics,

technology, the environment and
social values and behaviors are
set to re-draw the investment
management landscape.
The future is being shaped by a wide range of global
megatrends which are already bringing about profound
changes to the global political and economic outlook,
social norms, personal lives and the corporate world.
Most people are already aware of the broad direction
of change and some of the more immediate aspects.
In the investment management industry, many of these
themes have been reflected in investment strategies.
However, we believe the implications for investors
needs and requirements (as well as for asset managers
business and operating models) need to be more
fully explored.
KPMG has done a considerable amount
of work in this area and developed thinking around
six key megatrends. In this paper we have focused on
the four megatrends we believe are the most relevant
and pertinent to the investment management industry:
Demographics, technology, environment and social
values, behavior and ethics.
Demographics
Demographic trends will not only magnify the
need for effective investment management,
but over time, they will radically change the
nature of the challenge and an investment
managers potential client base.
Environment
Resource insecurities are changing the nature
of investment opportunities and demand
for risk protection, as well as increasing the
importance of socially responsible corporate
behaviors and investment strategies.
It is also worth noting that many of these megatrends

are likely to be impacted by developments in global and
local government policy, as well as the shape and nature
of future regulatory change. While we recognize the
significant roles such factors have had in shaping the
industry of today, forecasting future change is inherently
difficult and hence has not been directly incorporated
into this paper.
In addition, we encourage you to consider and evaluate
the potential impacts of these trends, not only in
isolation, but perhaps more importantly in combination.
While most risk/return theories and corporate strategies
can cope with each of these trends on an individual
basis, where they typically fail is with the unprecedented
combinations and high level of interconnectivity which
exists between these trends.
We believe that while megatrends present challenges,
they also bring unprecedented opportunities. If the
investment management industry seizes the chance
to understand the implications, reshape and transform
itself, it will have the opportunity to add considerable
value in the marketplace of tomorrow.
Technology
Technological developments continue to
act as major drivers of social, economic
and environmental change, creating new
opportunities and disrupting existing
business models.
Social values, behavior

and ethics
Technology and the internet have combined
to revolutionize how a large proportion of the
worlds population interacts, communicates
and behaves.
14
MEGATRENDS
Demographics
Population
growth
Increasing
life events
Aging
population
Working
longer
Growing
middle class
Growing economic
influence of
developing world
Changing role
of women
Increasing
urbanization
Environment
Mounting
environmental risks
Growth of socially
responsible behavior
Increasing resource
insecurity
15
Technology
Rapid pace of
technological change
Increasing
connectivity & ubiquity
New innovations
1010 01
0 0 0 110
1010 01
Data growth
Social values, behavior and ethics
Increasing demand
for personalization /
customization
Like
Importance of
networks & social
relationships
Growth of
social media
Importance of
trust & integrity
Social political &

cultural differences
Demand for
immediacy
Desire for simplicity

& transparency
16
MEGATrENDS:
DEMOGrAPHICS
The opportunity and the challenges
17
Demographic trends will have a material impact on the investment management

industry. Not only do these trends magnify the need for effective investment
management, but over time, they will radically change the nature of the challenge
and an investment managers potential client base.
Population
growth

The world population continues to grow, although

the rate of increase is now slowing.
The global population is predicted to peak at

approximately 9 billion before declining slightly
by 2100.
Developing regions are expected to account for 99

percent of population growth until 20501 although
some of these regions will no longer be classified as
developing by this point.
The global economy is facing

unprecedented demographic
changes. Perhaps most importantly
for the investment management
industry, aging populations, low birth
rates, low savings rates and high
levels of fiscal debt are creating a
retirement burden which is shifting
increasingly to the individual.
Working
longer
Aging
population

Increased life expectancy and falling birth rates are

creating unhealthy population pyramids in most
developed countries.
Medical advancements and the need to fund longer

lives will inevitably mean longer working careers
for most people.
While Asia, Africa and Latin America are enjoying

a youth dividend, sub-Saharan Africa could be the
only population not to be aging by 2030.
For employers, this is likely to mean a greater

number of generations in the workplace at the
same time, each with different requirements and
expectations of working culture, style and location.
With responsibility shifting increasingly to the

individual from governments and corporates,
this is creating a considerable healthcare and
retirement burden.
While an opportunity, this also represents a sizable

challenge for the investment management industry
in terms of how to provide these individuals with
the retirement lifestyles they expect.
Population growth of 65+ bracket2

Today
8% of the population is 65+
Changing role
of women

Women are playing an increasing role in global

boardrooms and controlling a greater proportion
of financial assets and decision making.
In the United States, it is reported that women

control about 60 percent of all household wealth and
drive approximately 80 percent of all consumption.3
2030
13% of the population is 65+
18
Growth of the global middle class4
60%
of the worlds population

will be middle class.
Up from 27% in 2009.
80%
By
2030
Increasing
urbanization
of the global middle class

reside in developing regions.
Up from 58% in 2010
Growing
middle class
More than 60 percent of the worlds population is

predicted to live in cities by 20305 with the majority
of this urban growth taking place in Africa and Asia.6
The middle class is projected to grow considerably,

especially in emerging markets, with more people
expected to be middle class than poor by 2022.8
This brings with it the potential for large-scale

infrastructure investment to upgrade legacy cities
or develop new Greenfield sites and could present
some of the highest growth opportunities for
investment managers in the future.
This trend is changing the production and

consumption dynamics of the world economy and,
combined with an appropriate political environment,
will help open up investment management
opportunities globally.
Increasing
life events
Growing economic influence

in the developing world

The emerging and developing economies in the

East and South are growing in power, influence
and potential.
People are experiencing more complex and multifaceted histories, with multiple life-events and more
varied investment requirements.
By 2030, some experts predict that Asia will

have surpassed North America and Europe
combined in terms of global power, with China
projected to overtake the United States as the
largest economy a few years before this.7 Others
challenge such statistics, commenting that
while China is projected to overtake the United
States economically on the basis of purchasing
power parity, forecasts do not take into account
the declining working age population in China or
Chinas high debt to GDP ratios.
We are having our children later, providing

financial assistance to them for longer periods and
increasingly providing for elderly parents at the
same time. For example, 49 percent of babies born
in England and Wales in 2012 had a mother who
was aged 30+.9
There is a shift toward more frequent employment

breaks, changes of career and growth in
international assignments. In the United States, the
average employee tenure is 4.4 years, but for the
youngest employees, it is about half of that.10
Regardless of the economic specifics and timings,

the increasing economic influence of eastern and
southern economies will bring with it significant
religious and cultural shifts.
We are continually
faced with a series of
great opportunities
brilliantly disguised as
insoluble problems.
John W Gardner
Former US Secretary of Health,
Education and Welfare
MEGATRENDS:
TECHNOLOGY
A revolutionary force disrupting business models
21
Technological developments continue to act as major drivers of social,

economic and environmental change. As well as underpinning many of the
trends impacting the industry, technology also presents an ever-increasing
range of solutions to deal with the challenges presented.
Rapid pace of
technological change

The increasing speed of technology adoption is

one of the most obvious and pervasive examples
of the information technology revolution.
New technologies are being adopted faster,

innovation cycles are shortening and diffusion
rates are increasing throughout the developed
and developing worlds.
For radio to reach 50 million users, it took 38 years.

For TV, it took 13 years and for the internet, only 4
years. For Angry Birds to reach the same 50 million
users, it took only 35 days. This trend will
only intensify.
The digital revolution continues to

change every aspect of our personal
and business lives, creating new
opportunities and disrupting existing
business models.
Increasing
connectivity & ubiquity

Technology has become ubiquitous, with digital and

mobile devices embedded into every aspect of our
personal and business lives.
Seventy five percent of the global population

now has access to a mobile phone and, in some
countries, more people have access to a mobile
phone than to a bank account, electricity or
clean water.11 By 2030, 50 percent of the worlds
population will have access to the internet.12
This constant connectivity has changed our working

behaviors, daily routines and social values, both for
better and for worse.
38 years
75 years
13 years
4 years
3 years
2 years
1 years
Time taken to reach 50 million users13
35 days
22
For investment managers, keeping

abreast with investors changing
expectations in terms of access,
connectivity and service is likely
to create significant challenges.
At the same time, leveraging the
exponential volume of data created
in relation to investor needs and
behaviors is likely to become an
increasingly important competitive
differentiator.
New
innovations

Technological breakthroughs in fields such as

robotics, nanotechnology, natural resources and
healthcare and life sciences continue to transform
all aspects of both our private and business lives.
Furthermore, concepts such as virtual reality and the
internet of things are not as distant a possibility as
they may sound.
Robotic usage is anticipated to increase

considerably, particularly in the domestic setting,
with the Japanese aiming to have a robot in every
home by 2015 and South Korea to achieve this goal
by 2020.

In 2010, Eric Schmidt of Google said that in the
entire history of the world to that point, 5 exabytes
of data had been created. In 2010, that same
amount of data was being created every 48 hours.14
Nanotechnology continues to make the

miniaturization of products possible, with 15 percent
per annum growth forecast from 2003-2015.16
Aside from the inevitable storage challenges

created by this explosive growth, organizations and
governments worldwide are grappling with how
best to capture, analyze and leverage these large
data sets or big data.
Advances in areas such as alternative energy, microirrigation technology or precision farming will be
key to increasing the security of natural resources
and meeting the increased demand created by
population growth and economic advances.
Medical technology, pharmaceuticals and

biotechnology will be key areas of life science
research over the next two decades.
Data
growth

Harnessing the increasing volume of data provides

valuable insights into clients needs, requirements
and behaviors and helps personalize products and
services, thereby building increased loyalty.
Those that can successfully distill this information

have the potential to unlock a key source of
competitive advantage.
The world of data15
Emails
sent
every
second
2.9
MILLION
Data
Video
consumed
uploaded
by households to youtube
every day
every minute
375
MEGABYTES
20
HOURS
Data per
day processed
by Google
24
PETABYTES
Tweets
per
day
Total
minutes
spent on
Facebook
each month
50
700
MILLION
BILLION
Data sent
and received
by mobile
internet
users
Products
ordered
on Amazon
per second
1.3
72.9
EXABYTES
ITEMS

the rate of increase is now slowing


approximately 9B before declining slightly by 2100

percent of population growth until 2050, although
developing by this point
The global economy is facing unprecedented

demographic changes. Perhaps most importantly
for the investment management industry, aging
populations, combined with low birth rates, low
savings rates and high levels of fiscal debt is creating
a retirement burden which is shifting increasingly to
the individual.
To a one year old, a

magazine is an iPad
thats broken


only population not to be aging by 2030

individual from governments and corporates, this is
creating a considerable healthcare and retirement
burden

Kevin Kelly

lives will inevitably mean longer working careers for
most people

expectations of working culture, style and location

boardrooms and controlling a greater proportion of
financial assets and decision making

control more than 60 percent of all personal wealth
and 47 percent of women earn more than their
husbands
Editor of Wired magazine
The profile of an investment managers typical

client in 2030 could look very different from today
24
MEGATRENDS:
ENVIRONMENT
Risks and the more socially conscious
25
Resource insecurities are changing the nature of investment opportunities and

demand for risk protection. At the same time, with consumers increasingly
incorporating sustainability into purchasing decisions, the importance of
socially responsible behavior is rising up the investment management agenda.
Growth in socially
responsible behavior

Environmental awareness has continued to

grow and is becoming an increasingly important
purchasing criteria.
The younger generations have been born into

an environmentally conscious world and are
increasingly critical of environmentally unfriendly or
unethical behavior.
Being visibly green and ethical will no longer be

a nice to have for asset managers. Investors will
expect ethical and socially responsible behavior to
be baked into operating practices.
The growing acceptance among fund managers and
investors about the importance of environmental,
social and governance factors to investment
returns is anticipated to fuel growth in socially
responsible investment strategies.
Environmental consciousness is
increasing globally as demographic
changes and economic expansion fuel
more resource-intensive lifestyles.
With younger generations being

increasingly critical of unethical
behavior, investors will expect
social and ethical responsibility in
all aspects of corporate operating
practices.
Increasing resource
insecurity

Economic expansion is driving more resourceintensive consumption and greater resource

insecurity in areas such as water, food and energy.
By 2030, a 50 percent increase in food production

is anticipated to be required to feed a wealthier
and more demanding population17 and the world
is projected to face a 40 percent global shortfall
between forecast water demand and available
supply.18
The economic and social risks associated

with scarcity are creating a range of interesting
investment opportunities which many organizations
have already incorporated into investment strategies.
Projected resource stress in 203019
40%
shortfall between water

supply & demand by 2030
50%
increase in food production

will be needed by 2030 to feed
a more demanding population
26
Mounting
environmental risks

Accelerating environmental degradation, combined

with the need to meet the worlds demand for
fundamental commodities, such as energy, water,
food and rare metals is presenting issues such
as the risk of supply disruption, volatile pricing
and growing potential for conflict. The search for
alternatives presents not only an environmental
priority, but also offers a range of new
investment opportunities.
Water supply has the potential to act as a major
source of global conflict for decades to come. While
about 70 percent of the earths surface is covered in
water, 97 percent of it is saltwater. Of the remaining
3 percent, 2.5 percent is frozen and locked up in
Antarctica, the Arctic and glaciers.20 Additionally,
water is not evenly distributed around the globe. As
an example, a large proportion of India and Pakistan
rely on rivers arising on the Tibetan plateau for water
supply. China is already talking about damming the
flow of one or more of these rivers.
Urbanization and the growing tendency for human

populations to cluster in areas at risk of natural
disasters also increases the potential impact of
environmental damage caused by floods, storms,
earthquakes or other natural hazards as they occur.
Not only does this highlight the importance of

effective urban planning, it also raises questions
for the corporate world around location strategy,
risk protection, disaster recovery and
contingency planning.
From an investment management perspective,

it also creates evident opportunities to invest in
industries which are well-positioned to benefit
from infrastructure and development projects.
The extraction of rare earth metals has become

increasingly critical to the production of renewable
energy, smart devices and the mobile revolution.
Currently, China produces 97 percent of the worlds
output of such minerals and has already indicated
that it is prepared, when it deems necessary, to put
home consumption ahead of global supply.
Global water supply 21
97%
Saltwater
70%
of Earths surface is
covered in water
2.5%
Frozen
0.5%
Available

the rate of increase is now slowing


approximately 9B before declining slightly by 2100

percent of population growth until 2050, although
developing by this point
The global economy is facing unprecedented

demographic changes. Perhaps most importantly
for the investment management industry, aging
populations, combined with low birth rates, low
We are seeing the birth

of a new perspective
of the world, where
ecology and economics
are two sides of the
same coin.
savings rates and high levels of fiscal debt is creating

a retirement burden which is shifting increasingly to
the individual.



only population not to be aging by 2030

individual from governments and corporates, this is
creating a considerable healthcare and retirement
burden


lives will inevitably mean longer working careers for
most people

expectations of working culture, style and location

President
CEO of
the Volvo
Group
boardrooms
andand
controlling
a greater
proportion
of from 1997 to 2011.
Chairman
since 2011 and of AstraZeneca since 2012.
financial
assetsof
andEricsson
decision making

control more than 60 percent of all personal wealth
and 47 percent of women earn more than their
husbands
Leif Johansson
The profile of an investment managers typical

client in 2030 could look very different from today
MEGATRENDS:
SOCIAL VALUES,
BEHAVIOR & ETHICS
A changing way of life
29
Technology and the internet have combined to revolutionize how a

large proportion of the worlds population interacts, communicates and
behaves. While this presents considerable opportunities, it also presents
deep challenges to business models in an age when trust in financial
services has been severely damaged.
Generational shifts combined with

technological advancements have
transformed the way the worlds
population communicates, behaves,
who they trust and what they expect
from businesses.
Growth of
social media

In 2013, it is estimated that nearly one in four

people worldwide will use social online
communities, networks or platforms.22
The rapid rise in social media is transforming not

only contemporary behavior and the way in which
individuals interact and socialize with each other, but
its implications are considerably more widespread.
It has revolutionized the way information is

disseminated, transformed the way consumers
interact with businesses and governments and
underpinned the rapid creation of mass
movements.
By 2030, social media could replace many of the

more traditional types of media and information
sharing mechanisms, with some expecting it to
be deeply integrated into corporate IT platforms.
For investment managers, this creates not only

an ability to better connect and interact with its
client base, it could also create new investment
opportunities in industries that will benefit from
these technologies.
Tomorrows investor is likely to be

even more demanding, characterized
by a desire for immediacy, valuing
simplicity and transparency and
expecting a more personalized service.
Importance of
trust & integrity

A number of trends have come together to create

an entirely new trust paradigm.
Increasingly, people are trusting people like

me rather than corporations or professionals and,
as such, word of mouth and viral messages
are becoming more powerful than traditional
advertising.
Trust is increasingly binary in nature. It is given

instinctively but can be removed immediately
if abused.
This poses a particular challenge for the financial

services industry, in which trust remains at an all
time low. It will inevitably take time to rebuild.
Time spent on social

media per hour23
16
Minutes
US
14
13
Minutes
UK
Minutes
Australia
30
Importance of networks
& social relationships
Demand for
immediacy

Todays society is characterized by the desire

for instant gratification and time scarcity, with
younger generations often depicted as the
impatient generation.
Shortening attention spans, combined with a

thirst for information and a constant need to
multitask are increasing consumer and investor
demands for immediacy and 24/7 access across
a wide range of media types.
While almost all organizations continue to operate

in traditional hierarchies to manage and control
their businesses, todays rapidly changing and
complex environment is increasing the importance
of concepts such as innovation, flexibility and
transformation, concepts which can struggle to
succeed in an overtly hierarchical organization.
This, combined with the growth in networking

technologies and social media, has promoted
the importance of a more networked organization
with higher levels of employee interconnectivity
both within and outside the traditional
corporate boundary.
How well connected and networked are your

employees? Have you considered what you can do
to improve your network within the industry as well
as facilitate networks within your client base?
Desire for
simplicity & transparency

Whereas in the past technological innovation

and advancements often resulted in companies
increasing the complexity of products and
services, consumer demand is now clearly
favoring transparency and simplicity.
This is particularly true in the financial services
industry as it grapples to restore trust, recover
post-crisis and respond to a raft of regulatory
changes designed to improve transparency.
Early signs of this can now be seen in investment
management, with providers starting to use
captions such as total transparency, let us do
the hard work or set up a portfolio in under 10
minutes to advertise their proposition set.24
Social, political &

cultural differences

The world is globalizing and more generations and

cultures are working side-by-side.
These demographic shifts are creating cultural, social

and political differences within consumer segments.
Understanding these shifts and adapting and

tailoring approaches which recognize these
differences will become increasingly important.
Increasing demand for

personalization /
customization

The consumer of tomorrow is increasingly going

to expect personalized service and customized
or tailored propositions.
From a supply perspective, increased connectivity

combined with technological enhancements such
as the advent of 3D printing and big data analytics
are all acting as key enablers and facilitating the
ease with which products and services
can be tailored.
From a demand perspective, significant behavioral

changes and an expectation driven by social media
of a consumers ability to like, share, comment
and create is impacting consumers patience for
impersonal service and generic propositions.
While this trend remains relatively nascent, there

are already numerous examples of how the
corporate world is starting to respond, ranging
from a consumers ability to personalize their
credit card to retailers marketing strategies tailored
to individual consumer preferences, behaviors and
buying characteristics.
If you cant explain

it simply, you dont
understand it well
enough.
Albert Einstein
Theoretical physicist
32
33
Implications for
investment management
We believe the confluence of megatrends has the potential to have a profound impact
on the investment management industry and that it will look very different in 20
years time. With clients needs, requirements and behaviors expected to change
considerably and the industry trying to capture long term, sustainable and profitable
growth, it has a unique opportunity to reposition itself.
We believe that:
Value chain:
There are significant opportunities for
investment managers to play a more
important role in clients lives and the
industrys value chain.
Clients:
The clients of tomorrow are likely to be
very different from the clients of today,
both in terms of who they are, where
they live and what they expect from the
industry.
Products and brands:

Traditional products will increasingly
become components of outcomeorientated solutions, niches will
become more mainstream and aspects
of investment theory may be called into
question.
Market:
Globalization will continue to open up
new opportunities for the industry and
may necessitate a fundamental review
of asset managers market footprints
and market entry strategies.
Technology:
As the pace of change increases, asset
managers will need to transform their
operating models to create more flexible,
efficient and agile platforms.
Governance:
Asset managers need to create an
organizational structure which can adapt
and handle the complexities created by
further geographic expansion.
People:
The challenges associated with the
search for and retention of talent will
intensify.
We believe the industry will be

significantly larger and have a more
important role to play in society than
today. However, in order to be part of
this, many investment managers will
need to drastically change their value
proposition to remain relevant.
34
IMPLICATIONS
VALUE CHAIN
1
Power will continue
to shift towards those
who control the client
relationship
Outcome,
aggregation,
education and access
may be valued as highly
as the underlying
investment
performance
Investment
managers have
choices to make
CLIENTS
2
Client engagement
strategies will need to
be tailored to reflect
the diversity of the
investor base
Advice and financial

education will be
increasingly important
Investors
expectations of and
interactions with the
industry will change
considerably
Engagement levels
will vary significantly,
albeit in the main,
are anticipated to
increase
Client profiling and

a flexible operating
model which can
accommodate diverse
client needs will be
key
PRODUCTS & BRANDS
3
Outcome-orientated
propositions will
continue to gain in
popularity
Pensions innovation
is required to help
address the retirement
challenges
Retail product sets

will need to extend
beyond pensions
Core aspects of the

investment process
could be called into
question
Mainstreaming of
current investment
niches
Product flexibility
will become
increasingly
important
Pricing is likely to be
under a more intense
spotlight
Effective brand
management will be
key to success
35
MARKETS
4
Emerging and
developed markets
will increasingly
converge.
Market entry
strategies will need to
be much more robust
Market strategies may

benefit from a
multi-level approach
TECHNOLOGY
5
A core platform
and simple user
interface will be
critical
Delivering the
service promise
will highlight the
importance of
process efficiency
and organizational
agility
Client profiling
and effective data
analytics will
increasingly act as a
differentiator
Intensifying scrutiny
of risk management
frameworks
Growing
importance
of third party
relationships
Employees
expectations and
work patterns are
being redefined
Different skill sets

will become
more critical.
Value-added
outsourcing,
if executed
successfully, will
offer numerous
advantages
GOVERNANCE
6
Increasing
complexity of
international
organizational
structures and
governance
PEOPLE
7
The profile of the
talent pool will
change considerably
36
IMPLICATIONS:
VALUE CHAIN
The new investment

management value chain
37
We believe there are significant opportunities for investment managers to

play an increased role in the industry value chain. Indeed, on the premise that
product and performance are inevitably perishable, it may be crucial to capture
sustainable growth and diversify risk.
Power will continue to shift towards

those who control the client
relationship:
Outcome, aggregation, education and

access may be valued as highly as the
underlying investment performance:
Investment return will continue to be important.

However, we believe that the pendulum is continuing to
swing from manufacturing to distribution and that client
proximity and understanding will become increasingly
important differentiators.
For the more sophisticated and financially literate

investor, the underlying investment philosophy,
process and of course performance will inevitably
continue to be at the heart of where they see the
industry delivering value.
While the industry has already invested considerable

effort in moving from the product-push model of
the past, genuinely getting closer to clients involves
developing a deeper understanding of their needs and
maintaining a relationship over a greater proportion
of their life. We believe this will be paramount to long
term success, enabling those who achieve it deliver the
personalized and tailored customer experience clients
increasingly expect.
However, history suggests that performance is very

difficult to sustain over the long term. It is inevitably
perishable.
This is often easier said than done, particularly in an

industry where intermediaries are prevalent. Building
stronger partnerships with key intermediaries will be
increasingly important as the investment manager will
need greater visibility into the profile and behavior of the
end-investor to effectively develop relevant solutions.
If it is unable to achieve this, it faces the prospect of
remaining simply a manufacturer of components for
others to combine into value-add client solutions.
Controlling the client relationship

is likely to become an increasingly
important differentiator.
In our experience, many industry participants recognize

the inherent risks in relying on the consistent delivery
of market leading absolute or even relative returns
to attract flows, particularly in a highly competitive
environment where this is becoming increasingly
difficult to achieve. They also recognize that for many
investors of today and more importantly those of the
future outcomes, solutions, information, education and
greater visibility and transparency will be as, if not more,
important than performance.
Investment managers have a range of inherent
capabilities which could be better leveraged to play
a more important role in the value-chain. This could
be through bringing to bear research and assetallocation competencies to provide clients with a
broader range of solutions rather than just product,
helping intermediaries better understand the endinvestor needs and requirements, supporting the flow
of information and helping educate the end-investor.
There are also opportunities for investment managers
to act as aggregators, providing a more holistic view of
individuals assets and liabilities, something which we
consider will be increasingly in demand.
Investment managers will need to

understand their clients better than
they do now; no easy task when the
use of intermediaries means that
they may already be one or two steps
removed from them.
38
Tell me and I forget.

Teach me and I
remember. Involve me
and I learn.
Benjamin Franklin
American inventor, journalist, diplomat and statesman
39
This is not to suggest that investment managers will

dis-intermediate intermediaries although vertically
integrated D2C models will in our view increase.
However, we can see an opportunity for the relationship
between the two to develop and change such that
it is far more cohesive and more effectively brings
together the combined strengths and resources of
both organizations to support a more diverse client
demographic with significantly different expectations.
The industry also has a key role to play in helping
to demystify the world of investment and savings.
Education will be critical to help improve trust and
engagement with the industry. From a product
perspective, simplicity and transparency will help to
deliver propositions in a more relevant and
engaging way.
There are numerous options and we are already starting
to see signs of this transition within the investment
management sector. This supports our view that for
many players, future success will not be solely driven
by investment product and performance as it has often
been in the past.
User-friendly access and up-front asset allocation:
Newly emerging business models are seeking to
demystify some of the complexities of investing and to
provide simple user-friendly access to a broader range of
investors. Such propositions aspire to provide investors
with input and control over key inputs such as risk, time
horizon and investment objectives, but take away the
complexities of the investment decision and underlying
investment management. Instead, investors are offered
a discretionary service underpinned by a series of ready-
made, yet customized investment portfolios and an

asset allocation engine. A few examples of organizations
adopting this approach include Nutmeg, rplan
and FutureAdvisor.
Aggregation and packaging:
From a product perspective, since the launch of multimanager funds several decades ago, there has been
considerable growth in asset allocation solutions as
a means of achieving diversification through a single
investment vehicle. More recently, in todays low return
and volatile investment environment, multi-asset and
diversified growth funds have seen rapid inflows as a
means to invest and easily reallocate across several
asset classes and fund managers. Such funds have
also benefited from the ramifications of the Retail
Distribution Review (RDR) in the United Kingdom, as
Independent Financial Advisors (IFAs) increasingly
choose to focus on core skills of life and inheritance
planning and consequently outsource the asset
allocation decisions. In addition, target date funds are
taking a growing proportion of average retirement plan
asset allocations, both as a result of growing availability
and changes to product features which encourage target
date investing. In the future, we anticipate this trend
for aggregated solutions to continue to increase
in popularity.
The industry will need to radically

change its value proposition to remain
relevant in 2030.
40
Investment managers have choices to

make:
With investors increasingly demanding a more
customized service proposition, a generalist one-stop
shop approach is likely to be less successful, unless
all components are provided to the same level or
better than specialist providers and the solution can be
personalized to meet individual needs.
We believe this is likely to be the preserve of the larger
managers with a combination of financial strength,
brand, global footprint, depth of client relationship and
breadth of product access. For the rest of the market,
we believe they will need to be much clearer in terms of
the value they add and the markets in which they want
to play and focus their respective strategies accordingly.
The decisions are not easy to make especially given
the significant opportunities available. Choices will
have inevitable implications on the size of addressable
asset pools and margins, with the latter already under
pressure given increasing competition and regulatory
and investor scrutiny. This pressure is only anticipated
to increase as potential hardships felt by many in
retirement lead to increasing questions being asked of
an industry which has generated healthy returns during
accumulation,
yet not necessarily delivered in line with

investor expectations.
We believe that the highest operating margins are
likely to be the preserve of the more specialist boutique
managers. However, while global waterfront players
are likely to be achieving significantly lower operating
margins, with higher asset bases and a broader service
proposition extending beyond alpha provision, we
believe there will be opportunities to maintain
attractive margins.
Operating margin is likely to be

impacted by the choices managers
make in terms of where in the value
chain they will focus, as well as the
level of investor pressure and scrutiny
on the returns delivered relative to the
fees paid.
41
If you dont know where

youre going, you
will probably end up
somewhere else.
Lewis Carroll
English writer
42
IMPLICATIONS:
CLIENTS
Radical changes to client
demographics & expectations
43
The clients of tomorrow are likely to be very different from the clients of today,
both in terms of who they are, where they live and what they need and expect
from the industry. How will the industry respond to evolving investor needs?
managers needs to re-evaluate how to engage the

female investor and whether or not they will be
looking for a different investment philosophy or
risk / return equation. The benefits of getting it right
could be sizable not least in terms of the potential
to attract new assets. Numerous studies have
demonstrated that the behavioral characteristics
evidenced by women are exactly what the industry
is looking to attract. As clients, they demonstrate
greater loyalty, assign a higher value to the advice
they receive and have a preference for a planningbased approach versus an investment performance
based approach.27 We are starting to see a shift
in client marketing strategies, with a greater
proportion seeking to engage a more
female audience.
Client engagement strategies will need

to be tailored to reflect the diversity of
the investor base:
We believe the profile of the investor base is likely
to change materially and become considerably more
diverse.

Generational shifts: To date, much of the

industry has focused on the management of
wealth accumulated by Baby Boomers preparing
for retirement. As these Baby Boomers move
into retirement, can the industry confine itself
to managing their assets in the decumulation
stage? What engagement strategies does your
organization already have in place for Generations
X and Y and how will this need to change for
the Millennial, Digital Natives or Generation
Z? Does your business understand their
different engagement styles, preferences and
expectations? How will you establish a dialogue
with the younger generations? This theme has
already received considerable media coverage,
with a recent report by a company called Hearts
& Wallets concluding that if acquiring new clients
is the industrys top priority, it is overlooking
considerable opportunities by focusing on older
investors with big pockets. In fact, it estimates
that firms are currently only spending 16% of
resources on marketing strategies tailored to
younger investors.25
Wealth shifts: Similarly with economic

developments in eastern and southern economies,
investment managers need to consider how
distribution and client engagement strategies need
to vary to accommodate what can be significantly
different philosophical, cultural and religious
differences. There are very few brands currently
that recognize and make a play on the need for a
global / local approach.
194528
Gender shifts: It is fair to say that the financial

services industry has for too long focused on
engaging the male investor. With wealth shifting
to new demographic groups and women typically
outliving men by five to six years26, investment
Demographic transformation,
combined with technological
advancement and social shifts will
significantly change the profile,
needs and requirements of investors
by 2030.
Baby Boomers
1945 - 1965
Generation X
1960s - 1980s
Generation Y
Millenial generation
1980s - 2000s
Generation Z
Digital Natives
1995 - 2010
Generation Alpha
Google kids
2010 onwards
2030
44
Advice and financial education will be

increasingly important:
Financial illiteracy is prevalent globally and with
individuals being asked to assume more responsibility
for their financial well being, education and advice
will continue to gain importance. This issue is being
compounded by:

the increasingly complex range of products,

services and financial instruments available.
the need for investors to engage earlier in their life

when financial literacy rates are typically at
the lowest.29
the financial crisis, which both dented trust in the

industry and created an even greater need for
investor information. A recent TIAA-Cref survey of
1,000 American adults found that 46 percent say
they need a trusted place to go for financial advice
now more than ever.30
But where will people turn to for advice?

We are already starting to see the industry respond to
the growing need for financial education. For example,
a number of asset managers have recently introduced
personal financial advice sections on their websites,
featuring written guidance or videos which cover a wide
variety of individual life stage events, such as financial
considerations when starting your first full-time job,
moving to part-time work or starting a family. At the
same time, we are also seeing an increasing number of
organizations establishing content-only websites with
the intention of helping educate investors take greater
control of their financial affairs.
Investors are likely to increasingly

look outside the industry to peers
or like-minded individuals for
investment advice.
However, is this sufficient? With consumers placing
increased value on advice from peers and social
networks, how will this influence the advice spectrum?
Will they look outside the core of the industry for
support? We believe that while there will remain a
place for professional investment advice, investors
are increasingly likely to be influenced by peers, social
media, investment clubs and may even be prepared to
crowd source investment ideas. As such perhaps asset
managers should ask themselves what more could they

do to help connect and create networks of like-minded
individuals? There are early signs of asset managers
picking up on this trend, with a number of new providers
looking to incorporate the concepts of social media into
the investment arena, allowing investors to learn from,
interact with and copy other members investment
decisions.
Finally, perhaps the industry needs to think about the
issue differently. While certain organizations have
started to invest resources in this area, it is worth
contemplating whether financial education should
start earlier and whether the industry has a social
responsibility to help the government in its quest to
improve financial education in schools.
Engagement levels will vary

significantly, albeit in the main, are
anticipated to increase:
As with financial literacy levels, consumer engagement
levels with the financial services industry remains
considerably lower than the industry and global
governments would like. With regulatory changes and
government intervention continuing to amplify the need
for individual engagement, how to do this remains a
key challenge. We believe that by 2030, engagement
levels will have increased markedly, both as a result of
increased auto enrollment and individuals becoming
increasingly aware of their savings shortfalls. This is
likely to be also driven by experiential learning. Younger
generations may see their parents struggle in retirement
and face the prospect of actually having to take care of
them. This is likely to increase the focus on their own
retirement planning.
Early signs of this trend are already starting to emerge.
Research from BlackRock in the United Kingdom
suggests that people are taking financial planning
more seriously and starting to save at a younger age,
with those aged 24-35 now saving 18 percent of what
they earn in contrast to only 12 percent for those aged
45-54.31 Research from Merrill Edge supports these
findings. In the spring of 2013, it released a report
that noted young investors are starting to save much
earlier, at an average age of 22, whereas Baby Boomers
started saving on average 13 years later at the age of
35.32 In its same report in the fall of 2013, Merrill Edge
went even further, suggesting that within the mass
affluent segment, financial priorities have shifted
considerably from the start of the recession, with
saving for retirement cited as a number one priority
for Generations X, Y and Baby Boomers, beating other
priorities such as paying off debts or securing a job.
45
We believe investor engagement

will have to increase, simply because
falling state provision, issues around
corporate pensions and the prospect
of reduced inter-generational wealth
transfer mean that they will have to
take greater responsibility for their
own retirement planning. No-one
else will do it for them.
Despite what appears to be nascent signs of increased
engagement, we do recognize that there will remain
those who are either time-poor or simply uninterested
and who see financial planning as a nuisance. Such
individuals are likely to be happy to either avoid the issue
(which is going to become increasingly difficult) or to
look for someone to take the problem away. We are
already starting to see this theme play out in marketing
strategies, with one asset managers advertising tag
line being, Let us do the hard work.33 The challenge
for the industry will be how to address the needs of this
segment of the market while also providing a service
model which suits the more empowered and engaged
investor.
As a result perhaps we will see three types of retail
investor emerge:
1
those who are highly engaged in their personal

finances, likely to be quite self directed and
active on the investment front as well as heavy
technology users expecting a customized, highly
interactive service.
those who are interested and do engage from a

planning perspective, using technology to keep
an eye on the aggregate position of their assets
and liabilities but happy to also seek professional
expertise and discretionary management.
those who remain relatively disengaged or only

engaged to the extent they need to be for the
problem to be taken away and as such likely to
invest via a standardized, simple, almost fiduciary
savings system - if at all.
Investors expectations of and

interactions with the industry will
change considerably:
We foresee client service models undergoing significant
change in response to the evolving client profile. We
are already seeing consumers increasing thirst for
information, demands for multiple touch points and
growing acceptance of digital solutions. Such trends
are anticipated to accelerate, particularly for the more
empowered or engaged investors. Gone are the
days when investors will be satisfied with quarterly
meetings or statements. Tomorrows investor will
expect 24/7 access, full transparency and the ability
to self-report, review and re-balance investments via
a range of channels, including extensive use of mobile
technologies. We are not suggesting that all investors
will use this functionality and we are not advocating that
a standard retail investor re-balances his / her portfolio
on an overly regular basis. However, we do foresee
that successful investment managers will need to be
equipped to service a more demanding client type,
while continuing to satisfy the expectations of more
conventional clients, who remain satisfied with more
limited interaction.
We have witnessed similar shifts in other segments of
the financial services sector as well as other industries.
Limited opening hours, basic branch networks and
telephone or limited internet banking facilities have
been replaced by significantly upgraded retail stores,
satellite branches with extended opening hours and
comprehensive online and mobile services. The
investment management industry is already making
similar shifts, with certain players more advanced
than others. As an example, one large global manager
recently announced it is analyzing the times of day when
people use different computer devices in order to better
tailor its marketing and client service approach.34
The industry will have to capture new

customers far earlier and keep them
longer, by offering products tailored
to a younger, less affluent
and potentially less financially
literate market.
46
Client profiling and a flexible operating

model which can accommodate diverse
client needs will be key:
Finally, but perhaps most importantly, client profiling
and data-driven analytics will become an increasingly
important source of competitive advantage. Not only
will this enable investment managers to more accurately
anticipate client needs and buying behaviors and hence
customize product, marketing and service strategies
and service models, it will also help improve internal
efficiency and productivity.
To prosper in such a radically

redesigned investment landscape,
investment managers will need to
understand and profile their clients
better than they do now.
Similar disruptive, yet highly positive, changes are being

seen in virtually every industry. For example, in the
medical sector, doctors used to ask questions about
family histories in order to determine the likelihood
of prognosis based on current symptoms. With
modern genome analysis, individual DNA testing has
revolutionized diagnostic capabilities so that an individual
patients DNA can be analyzed to determine his or her
potential for contracting a particular disease or disorder.
What would such predictive analysis and profiling look
like in investment management?
It is highly likely that the one size fits all solution or
service model will disappear, with investors instead
insisting on individually designed solutions to meet their
specific needs, requirements, profiles and situations.
Please refer to the operating model section for more
information on this topic.
47
The first step in

exceeding your
customers expectations
is to know those
expectations.
Roy H Williams
Author and marketing consultant
IMPLICATIONS:
PRODUCT
Evolving product requirements and
the importance of brand
49
The core investment product will remain key as the industry continues to
strive for greater client centricity. However, we believe traditional products will
increasingly become components of outcome-orientated solutions, niches will
become more mainstream and aspects of investment theory may be
called into question.
Outcome-orientated propositions will

continue to gain in popularity:
Pensions innovation is required to help

address the retirement challenges:
In a low-return, low-trust and potentially more-volatile

environment and with the investor base undergoing
significant demographic changes, clients will
increasingly focus on target-driven results as opposed
to individual investment strategies or asset classes. We
are already seeing this with the growth of investment
solutions, multi-asset products and lifestyle funds.
Aging populations, low birth rates and high levels

of fiscal debt are creating a well-publicized global
pensions time bomb. In countries with well-developed
pension systems, the issue is one of increasing
dependency ratios, low savings rates, a low interest
rate environment and high levels of consumer mistrust
and disengagement. For less developed economies,
the challenges are compounded by even lower levels
of pension provision. It is estimated that less than 5
percent of the current African workforce is building up
any pension provision.36
While there are certain segments of the market that

question whether the multi-asset trend is sustainable
or merely a result of the current market environment,
we believe the broader solutions trend is here to stay
and likely to trigger significant changes to product sets
and the way they are marketed to investors. While the
more engaged investor may continue to be interested in
the specifics of the underlying investment, the majority
of the client base are likely to assign greater value to
products which deliver against specific, quantified
outcomes and pre-determined time horizons and risk
objectives. For some, particularly the less engaged or
sophisticated investor, we believe these individuals may
be willing to sacrifice some of the upside potential in
exchange for increased certainty that a stated outcome
will, in fact, be delivered. How will this be achieved?
Dynamic asset allocation will be at the core, combined
with access to all of the necessary components to
deliver the solution, or componentry as the Global
CIO of Russell Investments describes it,35 along with
appropriate risk overlays.
While the industry is well aware of the problem, very

little has fundamentally changed over the last 30 years.
For example, in the United Kingdom, while there has
been a shift from Defined Benefit (DB) to Defined
Contribution (DC), the introduction of concepts such as
the workplace pension and recent changes to annuity
rules, is this sufficient? We believe further product
innovation is required. How will the industry innovate
sufficiently to encourage saving and to help investors
live the kinds of retirement lifestyle they expect? Will it
even be possible for individuals to live the lifestyle they
envision? Will it be the design and launch of a radically
different pension proposition in the accumulation or,
perhaps more importantly, decumulation space? Or will
it be more subtle innovations which make the current
product set more effective, less costly and which
increase the breadth of appeal?
Together, the ability to package this solution within a

simple, clear proposition that demystifies some of the
industrys complexities and focuses on how it delivers
against investor needs will be key.
We believe investors will be looking

for increased certainty and protection
that the outcomes intended will
actually be delivered, even if this
involves an element of performance
sacrifice.
50
Never innovate to
compete, innovate to
change the rules of the
game.
David O. Adeife
Innovation author
51
The industry needs to broaden its

proposition set to be more relevant
from cradle to grave.
We believe pension innovation is particularly
important in the following two areas:
improving the levels of advice individuals receive

when entering into a pension arrangement and
when making choices throughout the life of the
scheme.
improving risk management within the product to

increase the certainty of outcomes.
enhancing the current decumulation product

offering to improve the simplicity and transparency
of current annuity offerings.
If we take the first point and use the United Kingdom

pension system as an example, the shift from DB to DC
transfers the risk and responsibility almost entirely to the
individual. While the financial motivations are clear, we
believe the majority of the population is not sufficiently
investment-savvy or engaged to make appropriate
and informed choices. As such, we believe investor
education, protection and support in the pensions arena
needs to increase. There is financial services regulation
to protect investors in all other forms of investment.
However, in one of the most important financial
decisions an individual will make, they are left almost
entirely without support. Is it right or even efficient and
appropriate that each member of a DC scheme needs
to seek independent investment advice or could the
industry provide better support and education to inform
decision making?
In terms of the second point, we believe there is a need
for improved risk management and potentially greater
risk sharing to improve participation and investment
certainty. In the current DC system, individuals bear
all the investment risk, yet the majority invest via a
standardized asset allocation model which moves to
fixed income as an investor nears retirement age. Very
few individuals pro-actively change their asset allocation
dynamically through the life of the product or as their
personal circumstances change. In todays low interest
rate environment, the absence of interest rate hedging
can often result in annuity levels which are significantly
below expectations. We believe there could be
opportunities for a more fiduciary solution in the pension
arena, with asset managers taking on a greater oversight

role. This role could include more active management of
the assets against a defined target and even potentially
the inclusion of some form of embedded guarantee or
a guaranteed floor to help improve confidence that the
intended outcomes will be delivered.
Finally, when turning to decumulation, in addition
to improving the simplicity and transparency of the
annuity purchase process and enhancing the way
liquidity is provided, we believe that with healthcare
improving, careful consideration should be given to
how to extend beyond the traditional at retirement
product marketplace to help the older generations fund
healthcare and the more active retirement lifestyles they
are likely to expect.
Retail product sets will need to extend

beyond pensions:
In many countries, the investment management
industry remains highly pension-orientated. With a
need to engage investors younger in their lives and to
help them prepare for a wider range of life events, the
industry needs to think about how to broaden its product
focus to enable it to be more relevant from cradle to
grave. Unfortunately, while providers already offer a
range of general savings propositions and are looking to
increase the prominence of such product offerings, the
emphasis remains on pensions.
More needs to be done to devise and market products
which are tailored and designed to help individuals
with broader savings and investment requirements
throughout their lives - ranging from supporting them
as they get their first job, buy their first house, get
married, start a family through to considering healthcare
options. We are already seeing signs of this shift with an
increasing number of providers tailoring product sets to
meet investors different life stages.
Retirement systems are under strain

globally. Pensions innovation will be
critical to increase investor protection
and improve savings rates.
52
Core aspects of the investment process

could be called into question:
The confluence of these megatrends could also bring
into question certain aspects of modern portfolio theory.
Algorithmic and computer trading is on the increase.
Opportunities for arbitrage are decelerating. The
boundaries of diversification are being retested and so
too are previously held assumptions about correlation.
These are fundamental issues, striking at the core of
investment management and which have the potential
to significantly disrupt the investment process.
If we look at investment theory, traditionally
sophisticated mathematics have been applied to past
data and combined with subjective qualitative analysis to
help portfolio managers devise investment strategies for
the future. Going forward, this could need to change due
to three material factors:
the aftermath of the financial crisis and the resulting

monetary and fiscal intervention, combined with
the advent of each of these megatrends, is resulting
in a future which is shaping up to be very different
from the past. The sophisticated models which
underpin quant or algorithmic hedge funds have
made limited allowances for this and for the extent
to which these trends are shaping the future.
With trend following quant funds having lost
money in 4 out of the last 5 years37 and automated
or algorithmic funds have underperformed the
broader hedge fund universe by between 2.07
percent to 3.7 percent in 2013,38 there appears to be
appropriate evidence that the impact of megatrends
and the manner in which they are affecting markets
needs to be better reflected in investment models
and process.
continuing improvements in computer technology

could create a situation in which computers take
on more aspects of the qualitative investment
process. Standard Life recently claimed that many
jobs performed by fund managers could be replaced
by machines. The primary rationale being that while
man has to deal with fear and greed, intellectual
constraint and fatigue, a machine is agnostic,
tireless and has no bias in decision-making.39
with the advent of social media and big data,

what data should be analyzed in order to inform
successful investment decisions? Could big data
or social media feeds, if properly analyzed, be
a better alternative to traditional practices and
analysis? We are already seeing new business
models emerge in the industry which claim to
be able to identify signals from millions of social

media messages, which could subsequently be
reflected into investment strategies, trades and
hedging arrangements. Similarly, other sectors are
beginning to be disrupted by new data sources. For
example, in the insurance sector, the analysis of
policyholders spending habits is starting to displace
traditional actuarial data as a more appropriate
predictor of individuals risk (and therefore pricing)
profiles. Can this happen in investment markets
in an analogous manner? What would investment
analysis look like in the face of big data going
forward and what could it mean for alternative
investment strategies?
Mainstreaming of current
investment niches:
While the search for return is likely to further increase
the diversity of the underlying investment base, we
also believe we will see many of the current investment
niches become more embedded in standard industry
practices:
Socially responsible investing (SrI): SRI or
environmental, social and governance (ESG)
investment strategies are expected to experience
a further revival and become an increasingly
mainstream component of the industry, as
environmental and social awareness levels and
concepts such as responsible capitalism continue
to grow. Despite the exponential growth that
SRI has witnessed in many global economies, it
remains a small proportion of the industrys total
assets under management (AuM), given concerns
regarding a perceived performance trade-off.40
While in other industries, consumers may be
prepared to pay a premium to support sustainable
and/or ethical behavior, fiduciary responsibilities
within the investment management industry
could pose a more significant barrier. Similarly,
many of the qualifications required within the
industry do not currently fully embrace the ethical
imperative of socially responsible investment.
However, the industry has taken a proactive
approach in attempting to change this perception.
Research published by Bank of New York Mellon
in 2012 based on a survey of 1,100 of its clients
suggests that 80 percent of firms believe there
is no performance trade-off between SRI/ESG
strategies and traditional investments.41 Similarly,
a study by Harvard Business School, which
analyzed the share price of 180 companies over
18 years, found that the 90 companies at the
forefront of implementing sustainability programs
were significantly outperforming their peers.42
53
segment to be increasingly adopted by retail

investors, the continuing demand for absolute
and non-correlated returns, combined with the
transparency, liquidity and regulatory oversight
that new regulated investment vehicles deliver, is
likely to lead to asset classes such as Real Estate,
Private Equity, Infrastructure as well as even
more esoteric investments becoming part of the
mainstream retail industry by 2030.
Current investment niches are likely

to become increasingly mainstream
as the pool of available alpha
reduces.
These factors, combined with increasing investor
demand and increasing international coordination
on responsible investment, are raising it up the
corporate agenda. The United Nations-supported
Principles for Responsible Investment Initiative
(UNPRI), an international network of investors
working together to put the six Principles for
Responsible Investment into practice in the sector,
now represents over 1,200 of the worlds leading
investors and accounts for approximately US$35
trillion in investment assets.43

Increasing awareness of environmental and social

issues also raises important questions for the
industry in terms of its investment approach. Is
the industry going to genuinely embrace longerterm investments? Is it willing to accept that
investment is no longer just about the optimization
of a single metric (shareholder returns and its
interplay with risk) and that there are other broader
considerations which need to be taken
into account?

Alternatives: We have already seen a significant

blurring between traditional and alternative
investments in the institutional marketplace. This
trend is only likely to intensify as alternatives
and hedge funds in particular become increasing
important components of retail portfolios. While
hedge funds are the first of the alternative
Sharia compliant investing: The economic

shift from West to East is also bringing with it an
important religious shift and prompting significant
growth in Islamic banking and finance. However,
with Muslims representing nearly a quarter of the
worlds population, it is estimated that currently
less than 1 percent of financial assets are Sharia
compliant.44 This fact can be attributed to a range
of factors, including a lack of credible propositions,
a reputation for a lack of diversity, a perception of
poor performance and high fees and the timing of
the financial crisis, which damaged confidence in
the heavily equity-skewed Sharia funds industry.
We foresee this position changing quickly over
the period to 2030, both as result of supply and
demand. From a demand perspective, the Muslim
population is expected to grow at about twice the
rate of the non-Muslim population over the next
two decades, such that Muslims make up more
than a quarter of the global population by 2030.45
In addition, we anticipate a growing demand for
Sharia offerings from non-Muslim groups. Supply
is expected to follow suit, with the availability of
Sharia compliant funds and Sukuks increasing
considerably as more non-Islamic markets show
heightened interest in Islamic finance and such
propositions become more integral components of
an investment managers proposition set.
54
Product flexibility will become

increasingly important:
Pricing is likely to be under a more

intense spotlight:
We believe that the product and portfolio of the future

will need to be considerably more adaptable in the
sense it:
With the growing trend for transparency, both in the

investment management industry and beyond, we
expect to see a growing focus on product pricing and fee
levels. Such a trend is only likely to increase in light of
additional regulatory and client scrutiny. We are already
starting to see visible impacts of this trend in the retail
marketplace, with a range of new online providers
actively marketing their proposition sets on the basis
of simple, flat fee structures or using tag lines such as
now quality investment management does not have to
cost thousands.46
can be flexed quickly, efficiently and at a low cost

to cope with changes in personal circumstances
or the market environment. With the pace of
change increasing, the ability to respond quickly to
events and triggers, including those which could
be outside of the portfolio managers initial control,
will become more important for both the investor
and the investment manager.
offers the flexibility to pull together individual
components into a range of wrappers. As
discussed, the value assigned to aggregation and
packaging is increasing, both within investment
management and other industries. While we
have already seen this with the growth in open
architecture and wrap platforms, we anticipate
this trend will accelerate, necessitating more
comprehensive links and working relationships
with other investment management providers to
enable better financial aggregation. Over time,
the blurring of boundaries between providers
in the investment management and financial
services industry more broadly is likely to increase
considerably as investors look to create a more
complete and single view of their assets and
liabilities. This trend will inevitably raise questions
for providers in terms of their areas of focus and
appetite for co-opertition - a combination of
cooperation and competition.
is portable. Pre-crisis investor and wealth mobility
increased considerably. While many experts expect
migration and mobility to remain relatively static or
to fall in the period to 2030, the flexibility to transfer
products, vehicles and assets across borders and
to invest in multi-currency products will continue to
be an important feature.
In a rapidly changing world, product

flexibility and the ability to respond
quickly to outside events will be
increasingly critical.
This trend is only likely to be intensified by the changing

risk return expectation, with investors potentially
becoming increasingly reluctant to pay hefty fees for
limited investment return while still bearing considerable
investment risk.
Effective brand management will be

key to success:
The trust issue within the financial services industry will
need to be resolved. Not only will this be critical in order
to drive improved investor engagement, but other issues
such as data security, confidentiality and data privacy
are likely to heighten the need for a trusted brand.
While it will take time and considerable effort to regain
lost ground, we believe a trusted brand will become an
increasingly important differentiator or, conversely, could
act as a potential threat to incumbent players. Could
there be an opportunity for an established investment
manager to partner with a more trusted, higher-profile
retail brand?
Effective brand management needs to extend beyond
a new logo, Facebook page or simple tweet. A trusted
brand and corporate identity needs to be built on
action and performance. Furthermore, with younger
consumers increasingly trusting people like me rather
than corporations or professions, branding strategies
need to extend beyond traditional corporate advertising
campaigns. We are already seeing growing recognition
of this across the industry, with digital campaigns
complementing more traditional media in order to reach
a younger, more tech-savvy audience. However, there
are downsides and risks inherent in operating in a more
interactive social media world, the most notable of
which being that it allows everyone to have an opinion,
including a disgruntled customer or investor. This, in turn,
increases the importance of brand protection strategies
relevant to the new social media environment. With a
rapid and appropriate response, a bad client experience
can be turned around.
55
Products are made in

the factory but brands
are created in the mind.
Walter Landor
Brand designer
56
IMPLICATIONS:
MARKETS
New market opportunities
57
Globalization has been a critical driver underpinning the scale and significance
of many of these megatrends. We believe this trend will continue and that
investment managers have an opportunity to extend their footprints to
capture new and emerging opportunities.
Emerging and developed markets will

increasingly converge:
This convergence is likely to create significant growth
opportunities for investment managers, as wealth
increases and retirement and savings markets grow and
develop. To achieve this, technology will be particularly
critical to gain ground and shape markets. Without the
legacy and cumbersome systems that often hinder
rapid technological adoption in developed economies,
emerging markets can often be faster adopters and,
hence, further ahead in certain areas of technology
usage, such as micro payments.
Market entry strategies will need to be

much more robust:
The growing potential in current emerging markets and
developing economies resulting from demographic
shifts in the South, East and Africa is much-publicized.
While most players have already diversified beyond
national boundaries, some into more developing or
emerging economies, many have failed to gain the
intended levels of traction in new markets, often having
created a disparate collection of models. Successful
market entry requires considerably more than just
positive macroeconomic indicators.
These new markets, particularly the less-developed, will
not suit the culture and risk profiles of every established
investment manager in the West. They are much more
susceptible to political and social upheaval, are governed
by considerably different regulatory regimes, cultural
A wealth of new opportunities

exist in many of the less developed
markets but such countries will not
suit the culture and risk profile of
every established western manager
and will require a carefully defined
and executed market entry strategy.
and religious belief systems and need to be assessed

against a range of qualitative criteria to determine
genuine attractiveness and entry strategies. Even those
markets that may appear attractive may not necessitate
a full service model to be established. Certain markets
may be more attractive from an asset gathering
perspective, while others may have opportunities
which warrant the establishment of a local investment
expertise. While the risks may be higher and some of the
choices may be difficult to make, the rewards associated
with getting it right can be high.
In most instances, while players will strive for global
consistency, local cultural, market and regulatory
differences are likely to require a tailored business and
operating model. Furthermore, the means of market
entry will need to be flexed not only by organizational
preferences, but heavily influenced by regulatory
requirements and local market practices. In some
markets, an organic market entry strategy, driven by the
relocation of trusted personnel from overseas offices,
may be successful. In others, a joint venture (JV) with
an incumbent player or acquisition may be the only
entry option.
When considering new market entry, a range of factors
should be considered. While the following list is by no
means exhaustive, it does provide a high level overview
of some of the key areas for consideration:

Local regulatory frameworks, tax environments

and licensing arrangements: Does the local
regulator environment actively encourage or
hamper new market entry? What are the key
regulatory differences from your existing market
footprint? How will the legal entity be taxed locally
and upon repatriation of profits to the head office
country? What are the licensing arrangements?
Are new licenses available or would an existing
license need to be acquired?
Financial stability: How stable is the local

financial market? Can investors readily access
local stock exchanges or are there investment
restrictions or legal risks that need to
be considered?
58
Target investor base: How financially literate

or sophisticated is the target population? Which
segments of the population offer the greatest
potential? What would local investors expect
from an investment management provider? What
are the potential and available asset and revenue
pools? What do international financial flows tell you
about where local investors are currently investing
(e.g. domestically or internationally)?
Regardless of market, successful market entry will

require a well defined strategy that is tailored to local
market specifics, aligns with and leverages existing
capabilities and is agile enough to withstand what could
be considerable flux as markets develop.
Competitive environment and channels:

How well-served is the local market by incumbent
financial and investment management providers?
What are the key channels to market and how
accessible are these? How well-developed are
local distribution networks?
Over the last few years, many global asset managers

have devoted considerable focus to refining and
managing the complexities of a global business. A matrix
structure has been commonly adopted as the most
appropriate means to leverage and share capabilities
more effectively on a global basis, while maintaining
sufficient proximity to local market nuances.
Foreign competitor activity: Have foreign

investment managers already entered the region?
How successful have they been and how have they
entered (e.g. via JV, acquisition or organically)?
Are there any restrictions on market entry
arrangements, particularly for foreign players?
Operating model: What organizational structure

would be necessary to meet local requirements?
What are the rules around the need for local
management structures? Do data and systems
need to be hosted and managed locally? What are
the restrictions on transferring data cross-border?
How well do you understand local business culture
and operating practices?
The 20 largest cities in 203047
Market strategies may benefit from a

multi-level approach:
As local markets develop and evolve driven by the

implications of these megatrends, it is likely to raise
questions as to how best to target and penetrate
individual markets. While previously strategies were
developed at a regional or a country level, we question
whether market strategies and groupings should be
created primarily on the basis of geographic location
or whether local market and investor characteristics
and dynamics should play a greater role in strategy
development. Market maturity, investor sophistication
and behaviors may be more appropriate criteria to
consider than simply geography when considering the
optimum organizational structure.
Urbanization could also present opportunities.
With megacities increasingly becoming powerful
communities and markets in their own right, we believe
a situation could arise in which individual city-level
strategies are required to complement a broader market
based approach. Such changes are likely to further
increase the complexity of the matrix.
13 Istanbul
14
Los Angeles Long Beach Santa - Ana
22
New York Newark
Beijing 16
22
12 Lahore
15 Cairo
Delhi 32
Tokyo
37
Shanghai
Dhaka
Mexico
City
22 Karachi
17 Lagos
29 Mumbai
Kolkata 23
24
Manila 17
18 Kinshasa
Rio de 13
Janero
Sao
Paulo
Buenos
Aires 14
22
1980
2010
2030
Slow growing
Rapid growing
Urbanization from 1980 to 2030 (population in millions)
21
59
Think globally,
act locally.
Akio Morita
Co-founder of Sony
60
IMPLICATIONS:
TECHNOLOGY
A focus on operating
infrastructure and technology
61
As the pace of external change increases, so does the need for flexibility and
agility in the core operating model. Technology will need to move far higher up
the agenda and more radical options will need to be considered to drive the step
change required to support sustainable growth.
A core platform and simple user

interface will be critical:
Many investment managers are characterized by
a myriad of legacy systems. While work has been
ongoing for some time to improve the connectivity
and integration of these systems, it is questionable
whether many have gone far enough. In fact, many
clients recognize that a large proportion of technological
development has focused on resolving the problems
of yesterday.
We believe that a robust core platform which can
support customized and tailored propositions to
address clients increasingly diverse needs and
service expectations will be crucial. As we have seen,
generational differences alone will necessitate a
platform capable of dealing with clients who will want
to interact in different ways, through different types of
media and who expect information to be provided in a
wide variety of formats.
In addition, the ability to allow others to plug and play
on the platform may also be increasing important as
open architecture becomes more prevalent. Finally, with
a growing number of consumers valuing the concepts of
transparency and simplicity, anything that can be done
to simplify client portals and web applications is likely
to pay dividends in customer acquisition, retention and
satisfaction levels.
Case in point is Apples iTunes platform. The real power
of iTunes is in its simplicity. While it acts as the backbone
to the operating platform, it can be easily flexed and
tailored to an individuals requirements and others can
add to it via the creation of Apps. The manner in which
While asset managers have already

been working hard to improve
operating platforms, we believe
much of this work has been
focused on addressing the legacy
of yesterday and problems of today,
rather than preparing for the future.
any two users interact with the iTunes platform can vary
greatly. Yet, each user can be accommodated via the
one simple platform. Could the same be said for many
asset managers platforms? How easily can they be
customized and tailored to suit different investor needs?
Do asset managers platforms enable the organization to
respond rapidly to a quickly changing world?
Asset managers will need to invest

for the future to design and create
new platforms with the flexibility and
scalability to support a much more
diverse client profile expecting a
personalized and customized service.
Delivering the service promise will

increase the importance of process
efficiency and organizational agility:
Process efficiency and organizational agility will also
become more important to delivering the service
promise and reinforcing the brand values. For many
organizations, this will present major technology and
people challenges, particularly given that current
structures are typically built for constant and welldefined demands, something that could well be
increasingly rare in the fast-paced world of the future.
Building an organization which can more easily support
change is likely to require innovation, imagination and
creative problem solving. In addition, in the post-crisis
world, where the focus for many asset managers has
been on cost optimization and downsizing, there is
the potential risk that these strategies could impair
an organizations ability to respond to an increasingly
volatile world. Commentators are starting to consider
whether the industry has the capacity and capability
to create inbuilt organizational agility and corporate
resilience for use in times of unforeseen stress
and change.
62
Client profiling and effective data

analytics will increasingly act as a
differentiator:
The amount of data available about investors (e.g. their
needs and lifestyles) and about markets (e.g. their
profiles and dynamics) is increasing exponentially and is
typically disparate, inconsistent and difficult to interpret.
Sources range from internal customer relationship
management (CRM) data to information from
distribution partners, advisors and other external market
data feeds. Over time, this is only likely to increase as
feeds from other sources, such as social media, are
integrated into corporate systems.
There are further challenges in managing data quality
issues, ensuring that insights are relayed effectively to
the relevant functions and that the business remains
compliant with regulatory requirements, particularly
around data privacy. Making sense of this efficiently,
creatively and using it to predict behaviors will be one
of the core sources of competitive advantage. The
opportunities presented by efficient data analytics are
recognized across the industry.
We are seeing an increasing number of clients investing
heavily to harvest, scrub and leverage data to improve
operational effectiveness and, more importantly, help
inform and shape the relevance of client engagement
strategies. There has also been considerable media
coverage about how firms are looking to make data
useful to their sales teams.48 As an example, one global
asset manager has focused heavily on the cleaning
up and definition of data and recently announced it
was even moving an IT function into the distribution
organization to align the technology to work better with
the needs of the sales teams. Others are focusing on
how to use data to identify which distribution partners
they should be targeting, which are likely to be most
receptive to the managers offering, what topics they
should be talking to them about and how often they
should call on them.
The sophistication of consumer profiling techniques can
be clearly seen in other industries, particularly retailing,
where marketing and spend-based promotions are
increasingly tailored to individual buying behaviors.
While there are evident regulatory considerations
within the financial services industry associated with
recommending products or predicting services required
based on the profile of a particular investor or of similar
investors, rather than an individuals specific needs and
requirements, the potential presented by getting this
right cannot be underestimated.
Finally, it is not all about the information and data that

investment managers have available about their clients.
Lets not forget that investors can now access significant
quantities of data in real time, meaning this is no longer
the exclusive domain of the professional investment
manager. How will you handle a potentially betterinformed investor?
To effectively target and service an

increasingly diverse client base, we
believe that client profiling, data
analytics and operational flexibility
will be increasingly critical.
Value-added outsourcing, if executed

successfully, will offer numerous
advantages:
IT systems are no longer simply about transaction
processing and number crunching. Those functions
can and, in many cases, have already been outsourced.
Increasingly, we are seeing a trend towards more
managers outsourcing more middle- and back-office
functions in an effort to focus technology on delivering
genuine differentiation, to move the cost base to a more
variable model and to enable business resources to
focus on their core competency of managing money and
client relationships. There are also potential advantages
in using outsourcing as a means to keep up-to-date
with the rapid pace of technological advancement and
support more rapid proposition development.
If executed successfully, outsourcing can significantly
improve cost flexibility and agility and could better equip
an organization to capitalize on the opportunities and
respond effectively to the challenges created by the
marketplace of 2030. However, many have focused too
much on the cost agenda and have found a subsequent
lack of flexibility. The trend is moving towards broader
and deeper strategic partnerships. The importance
of this trend is only going to increase as businesses
move towards a more networked model, increasingly
incorporating relationships with businesses outside the
traditional corporate boundaries into the organizations
core structure and governance model.
63
Its not information

overload. Its filter
failure.
Clay Shirky
American writer and new media professor
64
IMPLICATIONS:
GOVERNANCE
Revised organizational structure
and governance models
65
Investment managers need to create an organizational structure which can

manage the challenges created by further geographic expansion, withstand
ongoing regulatory and client scrutiny and connect more effectively with other
organizations in its broader network.
Increasing complexity of international

organizational structures and
governance:
Global investment managers are already finding it
challenging to manage an organizational matrix on three
continents. This will become even more challenging
as organizations continue to diversify internationally
and consider how to manage the business across five
continents and an increasing array of time zones. Add
to this the need for rapid decision making processes
in what is likely to remain a largely uncertain world
and it is not surprising that we believe optimizing the
effectiveness of organizational structure will become an
increasingly pressing management issue.
For those seeking geographic diversification, we expect
management teams to focus on how to build and
manage a cross-border investment business. This is
perhaps most effective when structured as a federated
matrix to enable it to harness the economies of scale
and knowledge-sharing opportunities, but at the same
time can be suitably adaptive to accommodate local
variances. Many global investment managers have
already implemented such models and for them, the
focus is on how to optimize the model by reducing
inherent tensions and removing any resulting silos.
For example, many organizations have structures which
constrain local input into key decisions, are structured
around key people rather than to meet business needs
and are overly influenced by head office cultures and
time zones. Addressing some of these imbalances can
deliver significant benefits, creating better equilibrium
between global and local requirements.
There is also the potential for technological

advancements to simplify aspects of the challenge.
While there is often no replacement for face-to-face
contact and it is unlikely that even by 2030, technology
will have completely replaced the need for local physical
presence, the rapid pace of advancement in the field
of communications and connectivity is only likely to aid
collaborative cross-border working.
Globalization, digital connectivity

and resource scarcity are forcing
businesses to operate in an
increasingly complex world.
Intensifying scrutiny of risk

management frameworks:
With trust in financial services organizations remaining
significantly below most other industry sectors and
having been further damaged as a result of a range of
recent scandals, we know investors are already looking
very closely at risk management frameworks, controls
environments and fund governance arrangements.
We believe this scrutiny is only likely to intensify, both
in direct correlation to increasing investor awareness,
engagement and financial literacy, but also a result of the
amplification of the potential risks in a more connected,
mobile and globalized world. For asset managers, it will
be critical to ensure that a risk focus is embedded within
the organization, but in such a way that it does not
stifle innovation.
Organizational structures and risk

management frameworks will
continue to be under the microscope
with pressure coming from internal
and external stakeholders.
66
It isnt just investors who want greater assurances on

risk metrics, transparency at the level of counterparty
exposure and increased due diligence on manager
operations. This is being compounded by more
intensive supervisory pressure on how investment
managers organize their businesses to meet regulatory
requirements. It is unlikely that this scrutiny will subside.
Furthermore, despite global financial systems being
increasingly interlinked, it appears unlikely that even
by 2030 there will be a globally consistent regulatory
framework. That said, we do expect to see a growing
level of international, political, economic and regulatory
coordination as the number of issues requiring global
consideration and resolution grows.
Along with rapid globalization and the increasingly
interconnected nature of risk, comes the need to review
and reassess business continuity planning exercises.
While other industries such as manufacturing, sourcing
or insurance may be at increased risk of supply chain
disruption, no sector is immune. Investment managers
will need to consider how to best mitigate against future
disruptions. The consideration of factors such as the
risk of natural catastrophes, pandemics, terrorism or
other aspects of environmental, political or economic
uncertainty may play a more important role when
planning geographic expansion and local
market strategies.
In an increasingly networked
economy, better leveraging business
relationships can help maximize
value.
Growing importance of third party

relationships:
In an increasingly networked and connected economy,
investors are likely to expect and value aggregation
across a broad number of financial services providers,
as opposed to having to manage a series of separate
financial relationships. For such a shift to take place,
relationships, networks and connections with peers
and competitors, or co-opertition, will be paramount to
support future propositions and service models. Such
a transition would significantly impact organizational
structures, as processes will extend beyond existing
organizational boundaries. In addition, as outsourcing
relationships continue to develop into partnership
models, providers are likely to be seen as extensions
of the asset managers organizational structures,
presenting its own challenges.
We are already seeing signs of this trend in the
relationship between investment managers and
distributors. The value chain is shifting and presenting
new opportunities to develop and enhance their
respective propositions but clarity will be key to optimize
benefits. The same could be said with the growth and
development of the wrap and platform market. Are there
any other players or competitors in your network with
whom there may be mutually beneficial ways to
create value?
In addition, still on the theme of networks and
connections with external organizations, we are
witnessing an increasing number of investment
managers looking to either help their clients become
better connected internally based on their own
interactions with their organization or to establish an
internal organizational structure which mirrors that of
key distributors in order to improve working models and
deliver mutual benefits.
67
If you want to be
incrementally better:
Be competitive. If you
want to be exponentially
better: Be cooperative.
Unknown
68
IMPLICATIONS:
PEOPLE
The people challenge
69
We believe the challenges associated with the search for and retention of talent
will intensify as the profile of the talent pool changes, employees expectations
and work patterns evolve and the industry seeks different skill sets.
The profile of the talent pool will

change considerably:
Employees expectations and work

patterns are being redefined:
Employees share many of the same characteristics,

motivations and attitudes as clients. Employees are
equally impacted by demographic shifts, technological
developments and changes in social attitudes and
expectations. They will expect to communicate in
the same ways and will be quite prepared to share
judgments, both positive and negative, not only about
their experiences with different organizations but also
their employers. This will have considerable implications
for investment managers HR strategies.
As a consequence of the considerable demographic

and social shifts, employers are likely to find that by
2030 they could have four or five different generations
of employees in the workplace. While there are
considerable upsides to having such a breadth of
experience in the workforce, each generation is likely to
have very different expectations.
In the workplace of 2030, talent will be in different

places, with different religious and cultural beliefs. What
are your strategies for appealing to and engaging with
a more diverse talent pool? With women controlling a
greater proportion of financial decision making, how
will the industry increase the equality balance within
its workforce? According to BestInvest, only 5 percent
of United Kingdom retail funds are run by female
managers, suggesting the industry has significant
improvements to make to attract more women into the
profession.49 The same can probably be said for other
aspects of the diversity agenda.
Many commentators also believe that the war for talent
will intensify. Western Europe, the United States and
China are all expected to suffer a serious shortage of
qualified employees as the proportion of working age
people continues to decrease along with decreasing
employer loyalty. This trend will increase the importance
of a compelling employee value proposition to attract
and retain talent. There will also be opportunities to
better leverage HR data, enabling employers to create
the working conditions and environments in which the
best people will thrive and develop.
Asset managers may need to review

HR policies and practices to ensure
they accurately reflect both the talent
requirements of 2030 and changing
employee expectations.

Employee expectations: We believe that

understanding generational differences will
be fundamental to building a successful multigenerational workplace. While generational
groupings are seen by some as nothing more than
stereotyping, these groupings can help to provide
an overview of expectations and demonstrate how
working styles have changed over time. What are
your strategies to fit an increasing non-traditional
workforce in a largely traditional workplace? How
will you manage the potential for conflict which
could arise from Millenials or Digital Natives
expecting autonomy and responsibility early in
their working lives at the same time that Baby
Boomers are firmly established in and accustomed
to management roles?
In the workplace of 2030, talent

will be in different places, with
different beliefs, social attitudes and
expectations. Identifying, attracting
and retaining this talent is only likely
to become more difficult.
70
Traditional work patterns are being

redefined. Flexible resourcing
models and revised competency
frameworks will be critical to best
capture, leverage and motivate the
talent of tomorrow.
Working patterns: Societal pressures and

technological advancements are redefining
tradition patterns of work, including what
percentage of the population works in a
traditional job, adheres to core hours (9:00
a.m. to 5:00 p.m. Monday to Friday), is parttime versus full-time or works independently
versus being associated with a centralized office.
These changing employment models, as well as
improvements in remote working technology, will
lead to the creation of new and more innovative
employment models which, if designed and
implemented correctly, should establish a winwin for employers and employees alike. For
employers, increasingly flexible resourcing models
and working patterns should better help them
retain highly skilled employees, improve morale,
enable their organizations to better meet client
requirements which are likely to be subject to
similar flux and, at the same time, increase the
flexibility of their cost base. From an employee
perspective, flexibility is likely to better meet
generational differences in expectations and
should contribute to greater loyalty and
talent acquisition.
Different skill sets will become

more critical:
As investment processes and transactions become
increasingly automated and as technology increasingly
replaces roles and value shifts towards effective
client management, the core competencies asset
managers are searching for are likely to also change.
Investment leadership will remain sought-after.
However, other skills, such as client relationship
management, communications skills and, in technical
areas, data analytics and technological know-how,
will be increasingly sought after skills. Networks, joint
ventures and outsourcing could offer new channels
to access these skills. Again, we are seeing early
signs of this trend, with a number of asset managers
having announced partnership models with games
manufacturers in order to access the technological
capabilities required to keep pace in todays
marketplace. Such partnerships will only be possible
once investment managers have determined the skills
they will need in the future. By allocating some time to
think about these trends today, you can pave the way for
more strategic workforce planning to occur in the future.
71
Leaders must
encourage their
organizations to dance
to forms of music yet
to be heard.
Warren G Bennis
American scholar
Is there potential for

more radical disruption?
73
Given the combination of positive market prospects, the current lack of

innovation and the speed of technological development, we believe there is
potential for more radical disruption from new entrants and new propositions.
New entrants:
Clayton Christensen, Professor of Business
Administration at the Harvard Business School argues
that most established firms fail because they are
focused solely on sustaining innovation, in other words,
innovating from the existing base. They are, therefore,
vulnerable to disruptive innovation, which can create
completely new products, services, markets and value
networks. Based on our experience, the investment
management industry may be similarly vulnerable.
We are seeing some signs of new entrants challenging
the status quo. While relatively small at this stage,
there are a number of emerging models leveraging a
combination of technology, data, social networks and
communities to bring fresh propositions to market which
play to the evolving megatrends and could have the
potential to cause some waves in the industry. A few
examples include:
Wealthfront: An SEC-registered online financial
advisor catering to the young and tech-savvy Silicon
Valley community. The company, which only offers
investments in ETFs and index funds, is already
thought to have millions of customers using its
services. The company has adopted a freemium
model, in which the first US$25,000 is managed free
of charge and the next US$10,000 is managed free if
the user introduces a friend to the service.
Dataminr: This real-time social media analytics
company picks up more than 340 million tweets each
day, which it then uses to predict events on behalf
of clients in the financial and government sectors.
The company represents an entirely new category of
social media analysis and has the potential to provide
one of the earliest-warning systems on the market.
SNTMNT: Along the same lines as Dataminr,
SNTMNT describes itself as the first Application
Program Interface (API) in the world that gives
predictions based on Twitter sentiment for all S&P
500 stocks. The company says its algorithm provides
an extra indicator on top of fundamentals and
technical analysis. SNTMNTs machine learning
algorithms generate an indicator capable of
predicting share price movements between 1 and
7 days into the future with an accuracy rate of 56
We believe there is the potential for

new entrants with established brands
or more innovative product solutions
to cause more radical disruption.
percent. The company employs a two-step process
as part of its offering. The first is natural language
processing that is sourced from Twitter, Facebook,
blogs and news sites to identify what it calls mood
states. They then employ machine learning and
predictive analysis to make its predictions.
Nutmeg: The United Kingdoms first online
discretionary investment management company
which seeks to demystify the wealth management
industry by removing the jargon, opaque benchmarks
and fee structures and creating a proposition for all
levels of wealth. It builds and manages diversified
portfolios underpinned by an asset allocation engine
and since its launch in 2011, has apparently seen
aspects of its model replicated in both the United
States and in continental Europe by organizations like
FutureAdvisor and rplan.
Motifinvesting: An ideas-based stock investing
business which gained the backing of Goldman
Sachs as part of a US$25 million financing round in
April 2013. The company allows customers to invest
online in theme-based portfolios, Motifs and offers
a social platform which allows customers to tap into
and share ideas with other investors, claiming to
have made investing social.
eToro: A marketplace to trade currencies,
commodities, indices and stocks online in a simple,
transparent and more enjoyable way. 50 Its key
differentiator is its online investment platform and
active trading community, which enable investors to
learn from, interact with and even automatically copy
the investment styles of other network members in
real time.
74
One of the key challenges many new entrants will have

is creating a brand and building an appropriate profile and
distribution footprint. This has been a perennial issue for
many players, including existing incumbents seeking to
extend beyond existing markets and clients segments.
A trusted brand which resonates and appeals to a more
diverse client demographic and a new generation of
investors with widely different values and behaviors will
be increasingly crucial to build scale. Financial services
brands are struggling to achieve this having been
hammered in the aftermath of the crisis.
The only financial services organizations to be ranked in
the top 20 of Fortune Magazines 2013 list of the worlds
most admired companies are Berkshire Hathaway at
number 8 and American Express at number 13. The
highest-ranked firm with investment management
operations is JPMorgan at number 28.51 While the
survey and ranking methodologies may be open to
question, such results capture an important truth: these
judgments drive behavior.
It will take time to rebuild trust and polish brands
tarnished as a result of the crisis. Indeed, many have
questioned whether this is indeed possible, especially in
the eyes of the younger generations who are apathetic
about the traditional financial services sector. This
potentially provides opportunities for non-traditional
new entrants.
The top three companies in Fortunes list are Apple,
Google and Amazon. It may seem a little clichd but
could these be the next powerhouses in investment
management? Instinctively they have the attributes and
capabilities: brand ubiquity which is increasingly trusted
by younger generations; propositions that engage and
are relevant; business models which put them at the
center of extensive networks designed to make clients
lives easier, solve problems and change behaviors;
enviable distribution footprints; huge client bases spread
across all demographic groupings and an ability to
capture and leverage data to understand their clients and
infrastructure which can deliver personalized and
tailored services.
We are not suggesting that these players will enter the
fray with full investment management models although
that cannot be discounted. It is more likely that they will
look to partner with established providers. However, it
is in our view very pertinent to consider what a Google,
Amazon or Apple proposition may look like. How would
they look at and address the challenges the industry is
facing? How would they address the opportunities?
How would you respond?
It is certainly not far-fetched. The industry cannot rely

on its history as it says itself, the past is no indication
of the future! We have seen many other industries
which have been radically disrupted by the sudden
emergence of new entrants from traditionally noncompeting industries. Why could the same not be true
for investment management?
Indeed, some of these consumer giants have already
started to diversify into aspects of the broader financial
services industry. Recognizing the potential for
regulatory hurdles and constraints, would it be such a
dramatic shift for these entities to move into investment
management in some way?
Apple has more than 400 million iTunes accounts,
each attached to a valid credit card holder. That is a
sizable and loyal client base from which to build a
potential banking entity.
Facebook: With more than one billion registered
users who already use the site as their virtual ID,
Facebook has access to more personal data and
information on users behaviors than any other
company on the planet. And in 2011, 15 percent of
the companys revenue was generated by processing
payments (primarily by users making purchases
within social games). Having already succeeded in
the difficult task of convincing nearly a billion people
to use their site as a virtual ID online, the road to
becoming a virtual wallet could prove simple
in comparison. In fact, in April 2014 Facebook
announced plans to enter financial services in the
form of remittances and electronic money.
Google has already challenged the telecoms,
Global Positioning System (GPS), new media and
advertising industries. It has made early moves into
the banking sector with the launch of Google Wallet
and, more recently, its late-stage investment fund,
Google Capital, invested in a peer-to-peer lending
marketplace called Lending Club, suggesting further
interest in financial services. Why would Google not
be looking at an industry characterized by high levels
of customer loyalty and high margins?
There are plenty of technology

driven organizations outside of the
investment management industry
which can deliver the customer
service, personalization and brand
ubiquity that clients are looking for.
75
New propositions:
Given the lack of genuine product innovation in
the sector and the likely impact of a number of the
megatrends, we also believe that there may be the
potential for more radical propositions to shake up the
industry and perhaps even present new solutions to the
pensions time-bomb.
It is clear that retirement systems are under intense
pressure. It is also clear that while investment
performance is likely to continue to be important for
many, outcome certainty is an increasingly important
criteria driving savings and investment decisions.
Demand for this is also likely to heighten as an
increasing number of individuals realize, possibly
through experiential learning gained from observing the
struggles of their parents, that they need to take greater
responsibility for their future retirement.
According to a survey conducted by Allianz Life, 61
percent of employees in retirement plans fear outliving
their money more than death, with that percentage
rising to 82 percent among respondents in their 40s,
married and with dependents.52 Similarly, 69 percent of
those surveyed said they would prefer a product that
was guaranteed not to lose value than one providing a
higher return.53
The direction of travel seems set. The issue is how to
solve the problem?
Solutions, outcome orientated products, protection and
target date funds are increasingly prominent but to a
large extent these are incremental developments based
on the existing product set.
Typically we find incumbent players can struggle to
think of genuinely new and innovative propositions, as
their ideas can be limited by the restrictions of today.
Similarly, as Henry Ford once said, If I had asked what
my clients wanted, they would have said a faster horse.
However, could we not look at the problem through a

different lens? Cash at retirement is a means to an end
rather than an end itself. People need the cash to buy
products and services which they aspire to in retirement;
holidays, cars, healthcare etc. The amount reflects to a
large extent their expectations of retirement and what
these will cost. However, it is increasingly difficult to
anticipate what the world may look like and what things
will costs given the difficulty in predicting the future.
One potential solution is to take away the risk around
cash or transfer the risk from an industry which is
perceived to have underperformed against its original
promise.
This could potentially be achieved by locking-down
value earlier at regular points during your working life. It
could also be achieved by taking away the means and
moving directly to the end itself; contributing during
your working life to guarantee a new car every three
years, regular holidays, health checks and care etc. It
could be feasible that individuals would be willing to
build relationships directly with the product or service
providers and make regular payments during their
working life to guarantee these in retirement. While
potentially fraught with regulatory challenges and does
not necessarily obviate risk, it is feasible in our view.
Indeed, we are already familiar with time-shares which
is a similar concept. We believe that such a concept, if
appropriately worked through could have the potential to
improve investor engagement and individuals readiness
to save.
Modern day consumerism is a

tough addiction to break. We believe
investors will increasingly look
for alternative options to secure a
comfortable retirement, potentially
looking to lock down future access
to products and services to provide
greater certainty.
Conclusion:
Key questions for top management teams
We are not attempting to predict the future. We are

simply looking to better understand the megatrends
at work and how the confluence could impact the
investment management industry the profile of
the future client base, their needs, requirements and
behaviors, the industry value chain and business and
operating models.
Clearly, investment managers are likely to be impacted

in different ways by a different combination of trends.
There is also no one-size fits all response or strategy.
Each should consider the impact of the trends taking
into consideration the:
Current market and competitive position
We believe that while these trends present a range of

challenges, there are also significant opportunities for
the industry.
Vision and strategic and financial ambition
We also recognize that the spectrum of potential

outcomes is broad and the pace of change could differ
substantially in a number of areas. However, we are
firmly of the opinion that industry participants should
consider these trends and agree:
Willingness and ability to change
Which trends will impact you most? Where do you

need to act today? What do you need to do?
Core capabilities
Appetite for investment and risk

We hope that this paper stimulates debate within your
organization. We also encourage you to think carefully
about how your business may be impacted and more
importantly how you should respond.
What do you need to monitor and track going

forward?
What will you need to keep an eye out for and act
upon if it occurs?
What could happen which could change the rules of
the game and what will you do about it if it does?
We have set out what we regard as the top ten

questions to help you consider how you and
your business may need to respond:
1
What will your clients of the future look like?
How will their needs, requirements and

behaviors change? What will they expect and
value in 2030? How will their expectations
differ from those of todays clients and how
well equipped are you to respond?
How can greater efficiency and effectiveness

be embedded in the operating model?
Where will they be?

What strategies do you need to engage with
the Millenials, Digital natives and Google kids
as opposed to the Baby Boomers?
How will the industry value chain be impacted and

what role do you want to play?
How will this impact your relationships with
other industry participants?
Does the model have the agility to enable you

to respond to effectively to opportunities
and threats?
How are you capturing and leveraging internal

and external data to help you better engage with
clients and remain relevant?
How are you ensuring that a risk focus is

embedded within your organization to meet the
increasing scrutiny demanded by regulators and
investors alike but in such a way that it does not
stifle innovation?
How will your proposition and service model need

to change to meet evolving client needs?
How will you offer a product suite that better
meets clients broader savings and investment
objectives?
What are the implications for your brand and

market profile?
How do you anticipate the regulatory

environment to change and how well will you
be prepared?
How can this be strengthened and improved?
What people skills and capabilities will you require

in the future?
How will they differ from today and where will
they be located?
What opportunities are available to extend or

reshape your existing geographical footprint to take
advantage of emerging market developments?
What could be done to help create and manage
a truly global organization?
How well positioned is your operating model to

support the propositions required and satisfy
investors increasing demand for information,
education, personalization and immediacy of
access across a range of media?
How will you position yourselves to attract and

retain talent moving forward?
10
Where do you see the key risk of market

discontinuity coming from?
What could this look like?
How would you respond?
How could you change the rules of the game?
78
Endnotes
Pg17
United Nations Population Fund (UNFPA), Population

Trends: The Numbers and Beyond.
Pg17
National Institute on Aging, Why Population Aging

Matters: A Global Perspective, March 2007
Pg 17
Goldman Sachs, Equity Research - Fortnightly

Thoughts, 25 Apr 2013
Pg 18
United Nations Development Program, Human

Development Report: The Rise of the South - Human
Progress in a Diverse World, 2013
Pg 18
United Nations Population Division 2012,

World Urbanization Prospect, 2011
the world (April 2013) concluded that financial literacy

follows an inverted U pattern lowest for younger and
older consumers and peaking in the middle of the
life cycle
Pg 44
30 Ignites, Personal Finance in a Hot Tub: Firms Woo

Investors, 17 Oct 2013
Pg 44
31 Tony Stennig, BlackRock quoted on BBC News,

Financial fears for the future for those aged 45-54,
28 Oct 2013
Pg 44
32 Bank of America, Merrill Edge Report: Spring 2013,2013
Pg 45
33 Nutmeg website (www.nutmeg.com)
Pg 18
United Nations Population Division 2006,

World Urbanization Prospects, 2005
Pg 45
34 Ignites, Fidelitys Latest Tech Quest: DeviceHopping, 6 Nov 2013
Pg 18
National Intelligence Council, Global Trends 2030,

Dec 2012 - based upon GDP, population size, military
spending and technological investment
Pg 49
35 Investment Magazine, Outcome-oriented

investment solutions, 26 Feb 2013
Pg 49
Pg 18
European Union Institute for Security Studies,

Citizens in an Interconnected and Polycentric World,
2011
36 BBC News, Aging populations and fewer workers

strain pensions, 14 Sept 2010
Pg 52
37 The Economist, Computer says no - Hedge funds

looking to spot and ride market trends are hoping for a
fresh start, 30 Nov 2013
Pg 52
38 Euromoney, Quant funds struggle through Summer

sell-off, Aug 2013
Pg 52
39 The Telegraph, Artificial intelligence can help fund

managers, 11 Sept 2013
Pg 52
40 US Social Investment Forum estimate SRI accounts

for $3.74 trillion of AuM in the US in 2012 quoted in
Bank of New York Mellon, Trends in Environmental,
Social and Governance Investing, Oct 2012
Pg 52
41 Bank of New York Mellon, Trends in Environmental,

Social, and Governance Investing, Oct 2012
Pg 52
42 Harvard Business School, The Impact of Corporate

Sustainability on Organizational Processes and
Performance, 29 July 2013
Pg 53
43 PRI Association website (www.unpri.org)
Pg 53
44 PWC, Sharia compliant funds: A whole new world

of investment, 2009 (Calculation is based on total
global financial assets of $140 trillion (McKinsey
& Company, Mapping Global Capital Markets,
2009) and $729 billion total assets in the Islamic
finance industry (International Financial Services
London, Islamic Finance 2009, Feb 2009))
Pg 18
Pg 18
10 Future Workplace Multiple Generations @ Work

survey, 14 Aug 2012
Pg 21
11
Pg 21
12 European Union Institute for Security Studies, 2011
Pg 21
13 G.Koli Annan, quoted on visual.ly/reaching-50-millionusers`
Pg 22
14 1 exabyte is about the amount of data which can be

stored on 1.5 billion CDs
Pg 22
15 A collaboration between Good, Oliver Munday and

IBM, The World of Data
Pg 22
16 Roland Berger, Trend Compendium 2030, 2011
Pg 25
17 United Nations Food and Agriculture

Organization, 2012
Pg 25
18 World Economic Forum,

(http://www.weforum.org/issues/water)
Pg 25
19 2030 Water Resources Group, Charting our

Water Future, 2009 and United Nations Food
and Agriculture organization, 2012
Pg 26
20 UN Water, Water - facts and trends,

August 2005
Pg 53
45 Pew Research, The Future of the Global Muslim

Population, 27 Jan 2011
Pg 26
21 UN Water, Water - facts and trends,

August 2005
Pg 54
46 Future Advisor website (www.futureadvisor.com)
Pg 58
47 European Union Institute for Security Studies, 2011
Pg 29
22 eMarketer, Social Networking Reaches Nearly One

in Four Around the World, 18 June 2013
Pg 62
48 Ignites, How Firms Make Data Useful to Sales

Teams, 14 Oct 2013
Pg 29
23 Search Engine Journal, The Growth of Social Media,

Nov 2013.
Pg 69
49 Ignites, Why employing more women, makes more

sense: Morrissey, 25 June 2013
Pg 30
24 Nutmeg website (www.nutmeg.com)
Pg 73
50 eToro website (www.etoro.com)
Pg 43
25 Hearts and Wallets, Inside Retirement Advice

Accumulator focus, Aug 2013
Pg 74
51 CNN Money, Fortune: Worlds Most Admired

Companies, 2013
Pg 43
26 Financial Planning, Engaging women its a business

issue not a gender issue, 18 March 2013
Pg 75
52 Allianz Life, Reclaiming the future study, 2010
Pg 75
53 Allianz Life, Reclaiming the future study, 2010
Pg 43
Pg 43
Pg 44
Office for National Statistics, Live Births in England

and Wales by Characteristics of mother, 15 Oct 2013
World Bank , Information and Communications

for Development, 2012
27 Financial Planning, Engaging women its a business

issue not a gender issue, 18 March 2013
28 Grail research, consumers of tomorrow, Nov 2011
29 Findings from the Finra Investor Education
Foundations study into Financial literacy around
Changing the answer

is evolution. Changing
the question is
revolution.
Pep Guardiola
Spanish football manager and manager of Bayern Munich
Contact us
Editorial Board
Tom Brown
Global Head of
Investment Management
EMA Region
Partner, KPMG in the UK
T: +44 20 7694 2011
E: tom.brown@kpmg.co.uk
Ian Smith
The Strategy Group
T: +44 20 7311 1496
E: ian.r.smith@kpmg.co.uk
Lucy Luscombe
The Strategy Group
Associate Director, KPMG in the UK
T: +44 20 7311 1409
E: lucy.luscombe@kpmg.co.uk
Jim Suglia
Americas region
Partner, KPMG in the US
T: +1 617 988 5607
E: jsuglia@kpmg.com
Constance Hunter
Chief Economist, Alternative
Investments
KPMG in the US
T: +1 212 954 3396
E: constancehunter@kpmg.com
Andries Terblanche
Partner, KPMG in Australia
T: +61 2 9335 7570
E: aterblanche@kpmg.com.au
Bonn Liu
ASPAC region
Partner, KPMG in China
T: +852 2826 7241
E: bonn.liu@kpmg.com
Alexander Koriath
Director, KPMG in the UK
T: +44 20 7694 1902
E: alexander.koriath@kpmg.co.uk
Jacinta Munro
Partner, KPMG in Australia
T: +61 3 9288 5877
E: jacintamunro@kpmg.com.au
Alain Picquet
Partner, KPMG in Luxembourg
T: +35 222 5151 7910
E: alain.picquet@kpmg.lu
Sector Heads
Chuck Walker
Alternative Investments
T: +1 212 872 6403
E: crwalker@kpmg.com
Robert Ohrenstein
Private Equity
Sovereign Wealth Funds
T: +44 20 7311 8849
E: robert.ohrenstein@kpmg.co.uk
Jon Mills
Audit
T: +44 20 7311 6079
E: jon.mills@kpmg.co.uk
Andrew Weir
Real Estate
Partner, KPMG in China
T: +852 2826 7243
E: andrew.weir@kpmg.com
Robert Mirsky
Hedge Funds
T: +1 212 954 6162
E: robertmirsky@kpmg.com
Hans-Jrgen Feyerabend
Tax
Partner, KPMG in Germany
T: +49 59 9587 2348
E: hfeyerabend@kpmg.com
Tony Rocker
Infrastructure Funds
T: +44 20 7311 6369
E: antony.rocker@kpmg.co.uk
John Hubbe
Pensions
T: +1 212 872 5515
E: jhubbe@kpmg.com
kpmg.com/socialmedia
Charles Muller
Risk and Regulatory
Partner, KPMG in Luxembourg
T: +35 222 5151 7950
E: charles.muller@kpmg.com
Mireille Voysest
Global Sector Executive
KPMG in the UK
T: +44 20 7311 1892
E: mireille.voysest@kpmg.co.uk
kpmg.com/app
The information contained herein is of a general nature and is not intended to address the circumstances of any
particular individual or entity. Although we endeavor to provide accurate and timely information, there can be
no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate
in the future. No one should act on such information without appropriate professional advice after a thorough
examination of the particular situation.
2014 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG
network of independent firms are affiliated with KPMG International. KPMG International provides no client
services. No member firm has any authority to obligate or bind KPMG International or any other member firm
vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member
firm. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or
trademarks of KPMG International.
www.kpmg.com/investmentmanagement
Oliver Marketing for KPMG | OM015033 | May 2014 | Printed on recycled material.

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FINANCIAL SERVICES

investing in the future

Nobody can predict

investing in the future

Introduction and headlines

Social values, behavior & ethics

Implications for investment management

Is there potential for more radical disruption?

investing in the future

investing in the future

Have you ever considered what the investment

impact on almost every aspect of our lives, creating new

The world in which we live and work is changing

Resource insecurities are changing the nature,

The industry has grown considerably over the past 30

We believe that the confluence of these trends will

investing in the future

investing in the future

We believe that over the next 15 years:

Demographic transformation, combined with

This could include:

investing in the future

Operational flexibility and agility will become

connectivity with other organizations in the asset

4 }} Finally, there is the potential for the industry

to see more radical disruption. With retirement

}} a more effective organizational structure, capable

investing in the future

The future belongs

What could an investor

}} While there may be fewer typical investors,

}} Investors are likely to need to increase their level of

}} Institutional investors are also likely to continue to

}} They are likely to look for financial support to cover a

investing in the future

Wants and expectations:

}} Investors are likely to expect organizations to

}} Investors may increasingly trust and value advice

}} Investors will increasingly look for brands they can

}} Investors are likely to be more willing to consider

investing in the future

investing in the future

Seismic shifts in demographics,

It is also worth noting that many of these megatrends

Social values, behavior

investing in the future

investing in the future

Social values, behavior and ethics

Social political &

Desire for simplicity

investing in the future

investing in the future

Demographic trends will have a material impact on the investment management

The world population continues to grow, although

The global population is predicted to peak at

Developing regions are expected to account for 99

The global economy is facing

Increased life expectancy and falling birth rates are

Medical advancements and the need to fund longer

While Asia, Africa and Latin America are enjoying

For employers, this is likely to mean a greater

With responsibility shifting increasingly to the

While an opportunity, this also represents a sizable

The future belongs